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Acquisition of Additional Equity Stake

in Multi Screen Media

Presentation to the Group Executive CommitteeAugust 24th, 2011

DRAFT August 10, 2011

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Executive Summary• SPE believes it is important to the growth of its Indian Networks to buyout the partners in Multi

Screen Media (“MSM”)

– Acquisitions and launch of new operations [and other initiatives] are important elements to an India expansion strategy

– Minority partners have rights which allow them to block ,or slow down, or not fund these initiatives

– SPE and Sony synergies could be delayed or curtailed [have they been in the past or does this need to be more of a wishy washy “could” statement?] since all must be negotiated at arms length basis

• SPE has sought to to buy-out the current minority partners for some time and now has a limited window to do so

– Buy-out negotiations have occurred repeatedly over the past several years but have failed due to partners’ unrealistic price expectations

– The largest minority shareholder now has liquidity issues, more realistic price expectations and an offer from a private equity firm (Providence) that allows us to buy on similar terms

– Providence has an exclusive negotiation period which ends on [September 15]. If SPE does not act in this window and the minority partner returns to the market, the negotiation may deteriorate

• SPE seeks approval to increase its holdings from 62% of MSM up to 100% for up to [$324MM], creating increased leeway to freely operate this strategic asset

– SPE gains full control, allowing the increasing flexibility to acquire and/or launch new or strategic businesses

– Increased flexibility to drive synergies with SPE and Sony

– All current minority partner litigation is withdrawn

– The returns of the acquisition are attractive, generating additional future cash flow for SPE and increasing Net Income Attributable to Shareholders

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Sony Approval Request

SPE Seeks approval to buy-up to 100% of MSM for a total cash outlay of up to $326MM:

• Increasing its stake in MSM to 94.4% with a buyout of Grandway/Atlas’ shares for [$280MM]

– If the deal closes in FYE12 [$113MM] will be paid in FYE12 and if the deal closes in FYE13 [$122MM] will be paid in FYE13

• Providing a Sony Corporation /SGTS credit enhancement (Sony guarantee) of approximately $110MM, which relates to a portion of the total purchase price of [$280MM]

• And, potentially, purchasing the final 5.6% minority stake from Capital Group at similar price and terms (up to $46MM total price)

• [SPE is discussing with Sony if this approval is contingent upon having Private Equity commitment to buy the minority stake.]

Note from Drew: I recommend using the same total price for the deal in the FYE12 close scenario to keep it simple. If we beat it, great.

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Importance of SPT Networks & MSM India

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• SPE’s global portfolio of networks is a significant contributors to SPE’s overall revenue and EBIT

– Diversifies SPE’s revenue and profit base with higher growth and margins than content business lines

– Delivered 10-year CAGR of 17% for revenue and 43% for EBIT

• MSM India is critical to the overall network portfolio

– Delivered 10-year CAGR of 17% for revenue and 47% for EBIT

– Delivered $65MM EBIT in FYE11 and budgeted in FYE12 to grow by 40% to $91MM

($MMs)

SPT Networks Revenue and EBIT

($MMs)

MSM India Revenue and EBITRevenue EBIT Revenue EBIT

FYE02 FYE03 FYE04 FYE05 FYE06 FYE07 FYE08 FYE09 FYE10 FYE11 FYE12 Budget

0

100

200

300

400

500

600

700

800

900

1,000

-50

0

50

100

150

200

250

Revenue EBIT

FYE02 FYE03 FYE04 FYE05 FYE06 FYE07 FYE08 FYE09 FYE10 FYE11 FYE 12Budget

0

200

400

600

800

1,000

1,200

1,400

0

50

100

150

200

250

Revenue EBIT

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MSM India Business/Performance Highlights

MSM has two of the top five Hindi GE channels, making MSM a compelling offering for advertisers, and the two channels combined offer the same Gross Rating Points (GRPs) as the #1 channel

– Locked in the rights for the strongest television property in India – IPL Cricket

SET: MSM India’s flagship channel has doubled its ratings over the last 18 months; SET fluctuates between being the #3 and #4 ranked general entertainment channel

SAB: #1 channel among the tier 2 general entertainment channels (overall #5 position) and has taken over all of its competitors (Imagine TV, Star One, Sahara One)

SET MAX: Consistently ranked the #1 movie channel in India

SET PIX: Executing on new strategy to move from #3 to #2 by maximizing on the new output deal with SPT

Distribution: TheOneAlliance distribution bouquet makes MSM highly desirable to cable operators in a market that is capacity constrained

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MSM JV Ownership Structure

• Capital Group:

(a) Emerging Markets Growth Fund, Inc. (3.1%)

(b) Capital International Emerging Markets Fund (0.6%)

(c) The New Economy Fund (0.9%) (d) American Funds Insurance Series, International Fund (0.9%)

(e) American Funds Insurance Series, Global Growth Fund (0.2%)

Capital Group

(5.6%)

Multi Screen Media Private Limited

SPE Mauritius Holdings

(42.0%)

AtlasEquifin(12.1%)

(5.5% resident Indians)

SPE MauritiusInvestments

(20.0%)

Grandway

(20.3%)

SPE Total 62.0% Grandway/Atlas Total 32.4%

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Challenges with Current Partners

SPE has encountered legal difficulties with Grandway/Atlas

• In 2008 Grandway/Atlas sought an injunction against SPE’s capital call; SPE prevailed

• In 2010 Grandway/Atlas filed a petition with the Indian Company law Board to replace the board of directors and prevent future capital calls

− The injunction to prevent capital calls was declined by the courts

− The parties are appealing to the Indian courts and the matters are ongoing

• As part of the proposed transaction, Grandway/Atlas will be required to waive all past and current claims against Sony and its subsidiaries including withdrawal of the current litigation

Grandway/Atlas has complicated past expansion efforts and could hamper future growth opportunities

• Due to limitations on MSM’s growth imposed by Grandway/Atlas, Channel 8 in West Bengal is currently owned by SPE, not MSM, resulting in a time-consuming and inefficient corporate structure

• Potential expansion into the high-growth regional market might be stalled by Grandway/Atlas’ continued

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MSM/Sony Synergies Michael, Include this page or give verbal update instead?

• MSM delivered numerous synergies in Sony United efforts, despite arms length negotiations required by the JV

– Use of the Sony brand on MSM’s channels increased Sony brand awareness and helped electronics sales in India

– Implementation of one-click exclusive access to MSM’s library content on various hardware products like Sony Bravia TVs and Sony Ericsson phones supported premium pricing for these products

– Availability of exclusive ringtones from Indian Idol on Sony Ericsson phones provided unique offering to its customers

– Most favorable advertising rates for Sony sister companies and extensive brand integration benefited electronics sales

• Increased leeway for future opportunities will further build on these past successes

– Continue to explore strategic integration of Sony content on Sony products and devices to facilitate premium offerings and pricing

– Offer compelling and exclusive content on Sony devices to drive growth in consumer base

– Further collaborate on ad sales and brand integration efforts to cross promote and drive sales for all parties

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MSM Historical and Projected Financial Results• With strong historical growth and financial outlook, MSM is critical to SPT networks portfolio

– MSM performance has improved significantly in recent years and the operation is now consistently profitable 

– EBIT is forecasted to grow strongly over the next few years

• MSM is now generating positive cash flow and is in a position to start paying down its debt

• FYE10 cash flow includes $56MM net investment in IPL Cricket

• FYE11 cash flow includes $68MM WSG litigation deposit with the Indian High Court

US$ MMs Projection Projection Projection ProjectionFYE10 FYE11 FYE12 FYE13 FYE14 FYE15

REVENUEBase Business 216.9 320.3 393.1 432.8 469.8 520.8 IPL 142.9 75.8 195.1 186.0 213.7 244.8 TOTAL REVENUE 359.8 396.1 588.2 618.7 683.5 765.6

COSTSBase Business 229.0 279.1 346.5 365.2 399.4 438.8 IPL 114.7 51.6 141.5 143.2 163.6 186.1 TOTAL COSTS 343.8 330.7 488.0 508.4 563.1 624.9

EBITBase Business (12.1) 41.2 46.6 67.6 70.4 82.0 IPL 28.1 24.2 53.6 42.7 50.1 58.7 TOTAL EBIT 16.0 65.4 100.2 110.3 120.5 140.7

Operating Cash Flow (116.4) (55.5) 38.2 42.1 56.2 84.6 Interest 6.8 5.5 7.5 7.4 6.6 5.1 Taxes 1.0 8.1 7.8 8.5 9.3 10.4 Net Cash Flow (124.1) (69.0) 22.9 26.3 40.4 69.1

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MSM Consolidated Debt

FYE05 FYE06 FYE07 FYE08 FYE09 FYE10 FYE11 FYE12 FYE13 FYE14 FYE15 $-

$50

$100

$150

$200

$250

$300

$350

$18 $18 $37

$73

$113 $108 $86 $73 $63

$23 $11

$15

$26 $40 $50

$43 $40

$40 $34

$80

$100

$100 $100

$100

$50

$68

$68 $68

$68 $68

Non A/R Bank Financing Cricket AR Bank Financing WSG Litigation Deposit (SGTS Loan) Sony Debt

Cur

rent

Deb

t (U

S$

MM

s)

$163MM

$52MM

$304MM$284MM

$228MM

$139MM

$73MM

$271MM

$231MM

Actual Forecast

• Recent third party borrowings have been secured with no credit enhancement required

• As of August 2011, total Sony credit enhancements are approximately $229MM (Letter of Awareness / Letter of Guarantees) which includes seasonal IPL bank guarantees & WSG litigation deposit with Indian High Court

At March 31st

Budget

Do we want to be less conservative about debt repayment to paint a more compelling picture?

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Proposed Minority Partner Buyout

• SPE has an opportunity to purchase the Grandway/Atlas 32.4% stake for an estimated $280MM, increasing SPE’s stake in MSM from 62% to 94.4%

– The deal can be closed in FYE12 with total cash outflow in FYE12 of [$113MM] and the remainder paid over 5 years

OR

– The deal can be closed in FYE13 with total cash outflow in FYE12 of [$122MM] and the remainder paid over 5 years

– As part of the transaction, SPE requires a Sony Corporation /SGTS credit enhancement (Sony guarantee) of approximately $110MM, which relates to a portion of the total purchase price of [$280MM]

– SPE may potentially purchase a final 5.6% minority stake from Capital Group if similar terms can be negotiated resulting in a cost to SPE of $46MM. If this transaction occurs it would increase total cash outlay by $46MM from $278MM to $324MM

o Total cash outflow in FYE12 would be [$XXXMM] if closed in FYE12 or [$XXXMM] if closed in FYE13

• MSM currently has tax exposure relating to India transfer pricing, MSM’s taxability in India and clawback of certain Singapore tax incentives

– The total exposure could be approximately $100MM if SPE does not ultimately prevail on any of the issues ($32MM currently reserved)

– SPE will assume the minorities’ share of this exposure ($38MM) as part of the transaction

– From a practical standpoint, SPE currently bears the financial risk11

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Three parties will receive payment for the Grandway/Atlas stake for a total estimated cost of [$280MM]

1.Atlas resident Indian shareholders (5.5%)

– Total cash outlay of $45MM

– By law, we can not defer payment to the Indian residents. Therefore, this amount must be paid in full at closing

– Negotiated deal requires SPE to acquire Atlas entity to maximize tax efficiency for Atlas

2.Atlas non-resident Indian shareholders (6.6%)

– Total cash outlay of $55MM

3.Grandway shareholders (20.3%)

– Total estimated cash outlay of $178MM including interest

– Payment of $45MM – Grandway

– Grandway also has outstanding debt of $119MM as of May 27, 2011, accruing interest of ~$500k per month

o SPE has agreed to pay $100MM of this loan over the next five years on Grandway’s behalf. The difference between $100MM and the outstanding amount at closing, estimated to be [$25MM], will be paid to Grandway at closing.

If the deal closes in FYE12 [$113MM] will be paid in FYE12 at time of close and [$167MM] paid over X years

If the deal closes in FYE13 [$95MM] will be paid in FYE13 at time of close and [$27MM] paid on [April 15, 2012] for total FYE13 payments of [$122MM]. The remainder of [$158MM] will be paid over X years.

Note: potential deal with Capital Group for their 5.6% stake in MSM would be incremental to the [$280MM] proposed in this transaction12

Proposed Deal Structure

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Valuation Considerations

• Deloitte Touche Tohmatsu was engaged to value Grandway/Atlas’s 32.4% in MSM

• The Fair Market Value range reflects estimates from both discounted cash flow (DCF) approach and market multiples approach

• Three valuation perspectives were prepared:– The value to SPE includes the ability to fully control the asset and is based on Sony cost of capital

– The value to an Indian market strategic buyer includes the ability to fully control the asset but estimates a higher cost of capital than Sony

– The value to an average Indian buyer is lower due to the illiquid nature of a privately held minority stake

Value to SPE($MMs) Low Mid High

DCF - 11% WACC 1,077 1,183 1,307 Public Co. Comp 887 970 1,062 Total Equity Value 1,039 1,140 1,258 Value of 32.4% 337 369 407

Value to a Strategic Buyer($MMs) Low Mid High

DCF - 12% WACC 909 987 1,075 Public Co. Comp 834 910 989 Total Equity Value 894 972 1,058 Value of 32.4% 290 315 343

Value to an Average Market Buyer($MMs) Low Mid High

DCF - 12% WACC 911 989 1,077 Public Co. Comp 836 911 990 Total Equity Value 896 973 1,059 Value of 32.4% 247 268 292

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Average IndiaMarket Buyer Acquiring a

Minority Stake

Average Strategic Buyer buying up to 94.4%

SPE Buyingup to 94.4%

200

250

300

350

400

450

Independent Equity Valuation

$343

$290

$407

$337$292

$247

Proposed Providence Price ($265MM)

Proposed SPE Price ($278MM)

• At SPE’s proposed price of $278MM, SPE’s estimated IRR is [32%] and Payback is [8] years

Source: Deloitte Touche Tohmatsu

Gra

ndw

ay/A

tlas

32.4

% S

take

($M

illio

ns)

13

• SPE’s proposed purchase price for the Grandway/Atlas stake is below the value that SPE or an average strategic buyer is expected to derive from acquisition of the stake and associated incremental controls

The price difference between Providence and SPE is related to estimated interest costs

Net Equity Value for Grandway/Atlas’ 32.4% Stake

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Providence Deal With Grandway/Atlas

• In addition to a potential sale of its 32.4% shareholding to SPE, Grandway/Atlas has also been evaluating a similar offer from Providence Equity Partners

– Providence is in an exclusivity period with Grandway/Atlas as an alternative to SPE buyout, in the event SPE chooses not to complete the buyout

• Providence’s proposed purchase price is $235MM at closing plus up to $30MM in contingency payments

– Contingency payments of approximately $30MM to Grandway/Atlas based upon:

• MSM recapturing its $68MM advance in the WSG litigation

• Reimbursing Grandway/Atlas for its share of past due tax refunds

– Including deferred payments, implied net equity valuation of $818MM

• Completion of a sale of Grandway/Atlas shares to Providence would require SPE to enter into a new shareholders agreement, which will include minority shareholder protection rights, as well as exit options for Providence, most likely via an IPO or a put to SPE in the future

• Capital Group, while having no contractual right to do so, may desire to sell its shareholding concurrently with Grandway/Atlas ($46MM for their 5.6% stake), or may potentially choose to stay in the partnership and exit with Providence through a potential IPO

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SPE Deal with Private Equity

[In Process]

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Next Steps

• Complete Atlas due diligence and third party valuation for the Reserve Bank of India

• Finalize terms with minority shareholders

• Complete and execute long form agreements with minority shareholders

− SPE could negotiate that the deal close no earlier than April 2012 if desired by Sony

• Obtain regulatory approval

– If a competition filing is not required, approval could be received by Dec 31, 2011 but could extend to Sony’s FYE13

– If a competition review is required, approval will likely be received in FYE13

• Close