Thailand Broadcasting Sector - Credit Suisse

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

08 September 2011Asia Pacific/Thailand

Equity ResearchRadio & TV Broadcasting

Thailand Broadcasting Sector INITIATION

Structural nirvana poised for growth Figure 1: Top three TV broadcasters control 50% of ADEX; returns are highly leveraged to accelerating ADEX growth

50,000

60,000

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90,000

100,000

110,000

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q1130%

35%

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Thailand LTM ADEX (Bt mn; lhs) Top 3 TV Broadcaster % of ADEX (rhs) BEC ROIC (rhs)

ADEX growth accelerating into 2011

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110,000

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q1130%

35%

40%

45%

50%

Thailand LTM ADEX (Bt mn; lhs) Top 3 TV Broadcaster % of ADEX (rhs) BEC ROIC (rhs)

ADEX growth accelerating into 2011

Source: Company data, AGB Nielsen Media Research

■ Not the end, but rather a new beginning. Thailand offers the closest thing to broadcasting nirvana that one will find in media: TV is the dominant mass medium in the market; domestic consumption trends are driving higher advertising expenditure growth; advertiser brand fragmentation is high and most appealing of all; and the top three broadcasters control 50% of total advertising spending. The convergence of content through a broader network is an all but certain path, but rather than being the end of a higher return and dividend generation, we believe the forthcoming regulator could lay the framework for a more compelling growth era.

■ The 14+ years wait has come to an end. We do not believe the formation of the National Broadcasting and Telecommunications Commission (NBTC) will be an immediate destabilising force. We believe the near- to medium-term impact is positive, as it will finally create an orderly and pro-growth framework, which strong broadcasters such as BEC and MCOT can invest behind. We expect NBTC�s economic impact on the broadcasters to be felt in 2013 at the earliest, and it is too early to draw the simple conclusion that it will be negative.

■ Initiation of coverage: BEC with OUTPERFORM and a Bt52 target price and MCOT with NEUTRAL and a Bt33 target price. We believe BEC is better positioned to capitalise on strong near-term ADEX trends and be the leader in media convergence. We expect BEC to increase profitability, create more value from its cash reserves and post higher rates of dividend growth going forward. MCOT has ambitious plans, but is more exposed to regulatory changes in the near term and growth could be curtailed by heavier and lower return investments.

Research Analyst Karim P. Salamatian, CFA

66 2 614 6216 [email protected]

08 September 2011

Thailand Broadcasting Sector 2

Focus charts Figure 2: TV share among the highest in NJA and growing Figure 3: Total ADEX growth is expected to accelerate �

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TV ADEX (Bt bn; lhs) Total ADEX (Bt bn; lhs)TV ADEX as % (rhs)

3rd highest in NJA

51 5361

7182 86

90 92 90 90100 106 110

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TV ADEX All other medium ADEX Series3

CAGR = 7%CAGR = 11%

Source: AGB Nielsen Media Research Source: AGB Nielsen Media Research, Credit Suisse estimates

Figure 4: ... as private consumption is the primary driver of GDP growth

Figure 5: Thaksinomics Part I was very good for ADEX growth (YoY)

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Re al GDP Gro w th ( lhs)P rivat e Co nsum p tio n Co ntr ibu tion to GDP Growth (rh s)

Mo r e th a n 5 0 % of G D P g ro w t h fo r e ca s t to co me

f r om p r iv a te c o n su m pt io n

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11%14%17%20%23%26%29%

2Q00 2Q0 1 2Q 02 2Q03 2Q0 4 2Q 05 2 Q06 2Q07 2Q 08 2 Q0 9 2Q10 2Q11

PCE G rowt h A DE X Gro wth

Correla ti on = 6 3%Tha ksi nom ics Pa rt I

Source: Bank of Thailand, Credit Suisse estimates Source: Bank of Thailand, AGB Nielsen Media Research

Figure 6: BEC�s share gains driven by content; controls 20% of total ADEX Bt mn

Figure 7: Second-highest ROIC in global broadcasting that we expect to move higher EV/IC vs ROIC in the past 12 months

0

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BE C TV A d. Re ve nu e (lhs)BE C sha re of Tota l ADEX (rhs)Cha nnel 3 Ad . M arket S ha re (rh s)

'04 - '10 T V Ad. CAGR = 12.5% or 3x higher than total TV ADEX C AGR

TEN SON

MCOTKT Sky lifeGlobal

Mediacom

Phoenix

SURYAAUSTAR

TV Asahi

TV Azteca

CYFROWY

AMC SUN TV

M6-Metro.

BEC

y = 16.845x + 0.3523

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0% 10% 20% 30% 40% 50% 60%

Source: Company data, AGB Nielsen Media Research, Credit Suisse estimates

Source: Company data

08 September 2011


Structural nirvana poised for growth The Thai broadcasting industry is structurally appealing because the dominant medium is television and a consolidated group of broadcasters have held advertising customers captive. The key issue going forward is whether the new regulatory regime will alter the structure of Thai broadcasting and shift the balance of power away from incumbent broadcasters. In our view, structural changes are inevitable, the timing is not near term (2013 at the earliest) and BEC�s investments in content make it more resilient to structural changes.

Broadcasting nirvana TV is the only mass medium in Thailand, and because of this, the small number (5) of commercial free-to-air (FTA) TV broadcasters hold a disproportionately large share of total advertising spending (ADEX). The top three channels hold a ~50% share of ADEX versus the top ten advertisers who represent only 20% of ADEX. This balance of power favours the profitability and returns on capital for TV broadcasters. We do not believe the industry is on the verge of destabilisation and loss of its power position. Rather, TV broadcasters are best positioned to capitalise within the much-anticipated regulatory era.

Brand fragmentation � long-term growth driver As markets mature and consumer preferences become more developed, brand owners broaden their brand portfolios and use new launches to grow value. Over the past ten years, incremental ADEX spending has primarily been directed towards new brands and brand extensions. This is the most powerful long-term structural driver of ADEX growth and broadcaster profitability, which we believe the market is not recognizing.

Foundation set for robust ADEX growth We expect ADEX to grow above trend, by 11% p.a. until 2013 versus 8% historically. Favourable pro-consumption fiscal policies from the Pheu Thai government will likely be the primary catalysts in 2012. Thaksinomics Part I was a strong catalyst to advertising spending, and we envision a similar effect in 2012.

The beginning of a regulated era After waiting for 14+ years, it appears that Thailand�s broadcasting industry is on the verge of having a regulator with the powers to establish and oversee a competitive framework for private and public broadcasters alike. We believe the short- to medium-term impact is positive because a competitive framework and a powerful regulator will allow existing broadcasters to better deploy capital. It will unlikely be until 2H12 that the NBTC tables its Broadcasting Master Plan; therefore, the impact is not likely to be until 2013 at the earliest.

Multichannel is not the Trojan Horse We believe it is not only early, but too simplistic to assume that a multichannel generation will cannibalize advertising share away from the FTA broadcasters. Multichannel penetration is already among the highest in APAC and will likely continue to grow, but only represents 3% of ADEX whereas the top three TV broadcasters, armed with popular content libraries, now control nearly 50%. We believe multichannel will be incremental to TV ADEX and ADEX share of FTA broadcasters. Over the long run, multichannel provides a compelling growth opportunity for BEC.

BEC offers superior growth and near-term resilience We initiate coverage on BEC with an OUTPERFORM rating and MCOT with a NEUTRAL rating. We do not expect material economic changes in either business model over the next 12-18 months while the NBTC gets it footing; however, in the long-awaited regulated era, we believe BEC offers higher growth potential. Valuation for both is supported by the low interest rate environment, but MCOT�s earnings carry more susceptibility in the near term than those of BEC.

TV is the only mass medium in Thailand where a concentrated number of broadcasters hold advertisers captive

TV broadcasters control 50% of ADEX, which favours the power position and positions them well for new growth channels

More brands in the market = higher spending by brand owners

Pro-consumption policies are expected to drive above-trend ADEX growth in the near term

The 14+ years wait is over; NBTC is a positive for competitive framework. We expect policies to be laid out 2H12 with impact evident in 2013 at the soonest

Multichannel penetration is high and presents an attractive growth opportunity for broadcasters with strong content libraries

BEC offers superior growth in the new regulatory era and is positioned for convergence of media. MCOT is more susceptible in the near term

08 September 2011

Thailand Broadcasting Sector

4

Valuation comparables Figure 8: Global broadcasting comparable valuations 7 September 2011 closing prices

Company Symbol MktCap Last CS Upside EBITDA Margin DivYld P/B ROEUS$m Price Rating 2011E 2012E 2011E 2012E 2011E 2012E 2011E 2012E 2012E 2012E 2012E 2012E

BEC World PCL BEC.BK 2,737 41.00 O 27% 20.6x 17.7x 21% 16% 10.0x 8.6x 18% 17% 58.9% 5% 10.0x 57%MCOT MCOT.BK 699 30.50 N 8% 11.2x 12.5x 31% -11% 5.4x 5.8x 28% -7% 44.5% 7% 2.6x 21%

ASIA BroadcastingNippon TV 9404.T 3,641 11,090 NR 12.9x 15.1x 0% -14% 7.0x 7.4x 0% -5% 12.8% 2% 0.6x 4%FUJI MEDIA HLDG 4676.T 3,470 113,400 NR 26.1x 21.2x 0% 23% 5.5x 5.9x -5% -7% 7.9% 2% 0.6x 3%Sky Network SKT.NZ 1,769 5.50 NR 17.9x 15.7x -1% 14% 7.9x 7.5x -11% 8% 40.6% 4% 1.7x 11%Media Nusantara MNCN.JK 1,730 1,070 NR 14.8x 12.7x 34% 16% 8.6x 7.2x 27% 19% 31.1% 1% 2.2x 19%TV Asahi 9409.T 1,543 118,500 NR 17.0x 28.7x 27% -41% 6.3x 8.0x 25% -21% 6.3% 2% 0.5x 2%Global Mediacom BMTR.JK 1,371 850.0 NR 14.8x 11.9x 37% 25% 4.7x 4.0x 25% 17% 34.0% 1% 1.3x 12%Surya Citra M SCMA.JK 1,321 5,850 NR 15.5x 13.5x 38% 15% 10.5x 9.3x 13% 13% 47.6% 5% 5.0x 45%PHOENIX TV 2008.HK 1,275 1.99 NR 27.3x 13.9x -9% 96% 8.9x 6.7x 6% 31% 29.7% 3% 3.2x 22%KT Skylife 053210.KS 1,252 28,150 O 22% 35.2x 20.5x 6% 72% nmf 10.6x 16% 45% 24.2% 0% 1.6x 18%Ten Network Holdings TEN.AX 1,046 0.945 O 42% 12.7x 10.0x -20% 27% 7.5x 6.2x -18% 22% 20.1% 7% 1.2x 12%Prime Media Group PRT.AX 276 0.710 O 13% 9.6x 8.8x 47% 9% 6.6x 6.2x 20% 7% 24.6% 7% 1.6x 18%Average 18.5x 15.6x 14% 22% 7.4x 7.2x 9% 12% 25% 3% 1.8x 15%

Mediaset MS.MI 3,989 2.40 U 50% 6.2x 5.6x 5% 10% 3.6x 3.3x 8% 9% 26.2% 17% 2.3x 27%ProSiebenSat.1 PSMG_p.DE 3,817 12.40 O 102% 6.5x 5.1x 56% 27% 6.2x 5.8x 2% 7% 34.5% 16% 0.9x 35%ITV ITV.L 3,344 0.538 O 86% 7.6x 6.6x 14% 15% 5.2x 4.7x 7% 12% 24.3% 8% 2.2x 33%TF1 TFFP.PA 2,974 9.90 U 11% 13.4x 11.1x 22% 21% 8.3x 7.0x 26% 18% 11.2% 4% 1.3x 12%Modern Times MTGb.ST 2,830 298.4 NR 10.4x 9.1x -46% 14% 7.2x 6.0x 17% 12% 20.4% 3% 2.3x 27%Mediaset Espana Com TL5.MC 2,522 4.41 N 95% 6.5x 5.8x 18% 11% 6.3x 5.7x 48% 11% 26.9% 16% 1.3x 14%M6 MMTP.PA 2,486 13.70 NR 10.9x 10.6x 3% 2% 4.3x 4.2x -9% 2% 21.4% 8% 2.3x 22%Cyfrowy Polsat S.A CPSM.WA 1,712 14.70 N 9% 13.5x 13.4x 7% 1% 11.3x 11.2x 7% 0% 27.2% 0% 3.8x 29%TVN S.A. TVNN.WA 1,501 13.06 O 80% 17.7x 11.5x 490% 55% 8.6x 7.2x 32% 19% 30.6% 3% 2.5x 22%Antena 3 A3TV.MC 1,340 4.51 N 64% 8.4x 7.5x 15% 12% 6.7x 6.1x 14% 11% 21.1% 11% 2.6x 35%Zon Multimedia Service ZON.LS 1,126 2.59 O 74% 14.3x 10.8x 63% 33% 5.4x 5.0x 9% 8% 37.6% 8% 4.6x 43%Average 10.5x 8.8x 59% 18% 6.7x 6.0x 15% 10% 26% 8% 2.4x 27%

Sun TV network SUTV.BO 2,581 301.4 NR 15.4x 14.1x 0.00- 9% 6.9x 6.8x 1% -2% 74.3% 3% 4.3x 33%AMC Networks AMCX.OQ 2,355 32.87 NR 18.6x 15.0x 28% 24% 10.3x 8.9x 14% 11% 38.1% 0% 5.5x 64%CTC Media CTCM.OQ 2,254 14.33 U 5% 13.1x 12.7x -4% 3% 7.9x 7.6x 9% 3% 34.5% 5% 2.3x 24%Dish TV DSTV.BO 1,866 80.75 NR -47.8x nmf nmf -95% 27.3x 17.3x nmf 57% 26.2% 0% nmf 5%TV Azteca AZTECACPO.MX 1,727 7.21 N 39% 10.4x 9.8x -11% 6% 5.1x 4.9x 10% 4% 41.1% 2% 1.8x 19%Average 2.0x 12.9x 0.0x -10% 11.5x 9.1x 9% 15% 43% 2% 3.5x 29%

Global Average (ex BEC & MCOT) 12.2x 11.9x 30% 15% 7.6x 7.1x 11% 11% 29% 5% 2.2x 22%

AMERICAS Broadcasting

EUROPE Broadcasting

EPS GrowthP/E EV/EBITDA EBITDA Growth

Source: Company data, IBES, Credit Suisse estimates

08 September 2011


Broadcasting nirvana For four key reasons, Thailand�s television (TV) broadcasting is as close to nirvana for the incumbent broadcasters as we have seen anywhere:

(1) TV penetration is the highest among emerging NJA peers and presents the most powerful advertising medium in the country.

(2) TV�s share of total advertising spending (ADEX) is the third highest in NJA, dominates newspaper and radio and is the first to react to momentum swings in ADEX.

(3) TV�s share of ADEX has increased despite the strong emergence of non-traditional medium.

(4) To put this in perspective, the top three TV broadcasters have consolidated their power and now control 50% of ADEX (79% of TV ADEX) while the top three advertisers only control 11% of ADEX. The favourable balance of power is a formidable barrier to entry for new channel(s) and/or medium and supports strong pricing power because advertisers are captive spenders.

We do not believe the current state of Thai broadcasting is on the verge of being destabilised despite the recent formation of the National Broadcasting and Telecommunications Commission (NBTC). First, it has taken 14+ years for the industry to get to this stage, and we do not believe an actionable competitive framework will be in place for at least 12 months � assuming there are no further legal or political hurdles in the formation of the NBTC. Second, TV�s share continues to rise in a higher growth ADEX market, so incumbent broadcasters are becoming increasingly more important outlets for brand owners. Third, because they have the most popular programming in the market, incumbent TV broadcasters are best positioned to capitalize on media convergence across new channel, network and/or digital platforms.

TV is the king of all mediums Any way we look at it, TV is the most dominant and powerful advertising medium in Thailand. Advertising spend efficiency measured by reach is the highest for TV relative to newspaper/print and radio. In simple terms, US$1 spent on TV advertising could reach 63 mn potential consumers, whereas each dollar spent on newspaper or radio advertising may reach 12 mn and 40 mn, respectively. TV penetration in Thai households is 98% (Figure 9) versus an Asia Pacific (APAC) average of 84%. However, among developing APAC countries, Thailand has the highest television household penetration on an absolute and relative to GDP per capita basis.

Figure 9: Thailand�s TV penetration higher than its peers

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TH CH MA VN APAC PH PK IN ID0

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TV Household Penetrat ion (lhs) 2011E GDP per Capita US$ (rhs)

Source: Asia Television Advertising Coalition, Credit Suisse estimates

Fundamentals in TV broadcasting are compelling as TV is the only mass medium: TV share of ADEX is high, market share is resilient and a captive customer base

Top three TV broadcasters control 50% of ADEX

The industry is not about to be destabilised as new regulation is still some time away, market share continues to rise and leading content positions incumbents best

Thailand TV penetration of 98% is above APAC average of 84% and represents the highest reach for advertisers

08 September 2011


Surprisingly, newspaper circulation in Thailand is among the lowest in APAC at 1 daily newspaper for every 21 people, which compares to a ratio of 1:7 in developed APAC markets. Thais have a strong preference for television, and we do not suspect this dynamic to change anytime soon.

TV share of ADEX has not only held its ground, but is growing This naturally leads to ADEX being primarily concentrated towards television. TV�s (free-to-air, cable and satellite) share of ADEX has been ~60% historically (Figure 10), but TV�s mass appeal means revenues are highly levered to accelerating ADEX growth. Since 2007, ADEX growth has accelerated to 11% YoY and TV�s share has increased from 57% to 62% presently (Figure 11).

Figure 10: TV holds a commanding share of ADEX... Figure 11: ... and share is growing as ADEX accelerates

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TV Share of ADEX (%; lhs) ADEX YoY Growth (%; rhs)

Source: AGB Nielsen Media Research Source: AGB Nielsen Media Research

Among NJA countries, Thailand�s TV broadcasters have the third-highest share of ADEX (Figure 12) and the 12-month trend is among the most appealing. From another perspective, advertisers are more heavily dependent on the TV broadcasters for existing and new brand investment and market share development. As we discuss later, the peer markets have much larger shares of ADEX going to radio and newspaper (Figure 13), but rather than this being a sign of things to come in Thailand, it is a structural difference that favours TV broadcasters considerably.

Newspaper circulation is the lowest in APAC at 1 daily for every 21 people

TV has historically accounted for 60% of ADEX, but share rising since 2008

TV share of ADEX among highest in NJA. Low presence of newspaper and radio is positive for TV broadcasters

08 September 2011


Figure 12: TV share of ADEX among the highest in NJA % of ADEX

Figure 13: Newspaper and radio low share favours TV % of ADEX

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CH PH TH ID NZ TW HK KR MA SG AU IN (100)

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Movement in TV�s share of ADEX has a high positive correlation to YoY momentum changes in ADEX growth. This positive correlation has been seen in 32 of the past 45 quarters or 71% of the time (Figure 14). As ADEX accelerates on a YoY basis, TV�s share has historically increased. This demonstrates the importance of the medium when advertisers are looking to invest more heavily in existing brands, launch new brands and/or defend market positions. This is important because despite the emergence of a stronger non-traditional medium, we believe the same phenomenon will occur going forward. We forecast ADEX growth will accelerate over the next three years, which bodes well for TV�s share of ADEX.

The opposite holds true because by virtue of being the largest component of ADEX, TV is often the first medium of spending cuts when advertising budgets are trimmed.

Figure 14: TV share of ADEX sensitive to spending momentum swings (bp)

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Source: AGB Nielsen Media Research

TV offers high beta due to a pickup in ADEX because of its mass appeal

08 September 2011


TV share is rising despite the encroachment of the non-traditional medium The emergence of the non-traditional advertising medium (outdoor, transit, internet, cinema and in-store) has not taken the share away from TV but rather from newspaper and radio. TV�s strong penetration coupled with its low reach efficiency and penetration rates, has led to expenditure growth of only 5% annually since 1999 for newspaper and radio versus 8% annually for ADEX. The non-traditional advertising medium now represents 15% of ADEX versus 3.1% in 1999 (Figure 15). The non-traditional medium now has a larger share than that of newspaper and is the second-largest medium behind TV. The entire incremental share has cannibalized that of radio and newspaper.

Within the non-traditional medium, cinema is now the largest at 6.5% of ADEX, followed by outdoor at 3.9% (Figure 16). In terms of growth, cinema advertising has increased at an annual rate of 33% since 1999, but internet has not surprisingly taken over as the growth leader with an annual growth of 68% p.a. since 2005.

We believe that as advertisers constantly seek higher returns in their ADEX by reaching more potential customers through innovative mediums, radio and newspapers continue to be the most susceptible to cannibalization. TV�s entrenchment in Thai culture and the reach it offers continue to captivate the advertisers.

Figure 15: Newspaper and radio have been losing share ...% of ADEX

Figure 16: � to the rapidly growing non-traditional group% of ADEX

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Cinema Outdoor Transit In-store Internet


At 15% of ADEX, the non-traditional share is above what we see in more mature NJA markets such as Singapore, Australia, Taiwan and Hong Kong (Figure 17). The NJA average is 9%, so one can conclude that Thailand�s penetration of the non-traditional mediums is likely reaching its peak. Therefore, we believe further share gains will be minimal, and again, come at the expense of radio and newspaper rather than TV.

Non-traditional mediums have gained share from newspaper and radio � not TV

Cinema is the largest non-traditional medium but internet is growing the fastest

Higher penetration of non-traditional medium is limited, which is positive for TV ADEX

08 September 2011


Figure 17: Non-traditional media penetration already high % of ADEX

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Large medium but few channels � a rare combination in broadcasting Thailand is not unique when it comes to high TV penetration, TV holding a majority share of ADEX and non-traditional medium cannibalizing newspaper and radio. However, what sets Thailand apart and creates a near nirvana for TV broadcasters is the high level of concentration of TV ADEX to a small number of channels. Thailand has five commercial TV broadcasters and one public broadcasting channel where commercial advertising is not permitted (Figure 18). All five channel licences are owned directly or indirectly by the government, but can be broken down into two groups: (1) state-operated and (2) privately operated/concession agreements. Both private operators have build-transfer-operate (BTO) concession agreements with the owners whereby in exchange for full ownership of the airtime and programming, they were required to build-out national coverage through relay stations plus pay annual concession fees. When assets are acquired to operate the channel, they are transferred to the license owner, but the private operator has the right to the assets. BTO concession agreements were for initial 30-year terms, but both have been extended to future years.

We believe the risk of BEC not being able to operate the frequency for Channel 3 after concession expiry is low. BEC has had the concession agreement since 1978, and by the time it expires, it would have operated Channel 3 for 42 years. With all-day viewership share of 30% on the back of popular proprietary programming, it is unlikely in our opinion, that the license will be auctioned off to another operator. In our valuation, we include a large capex payment in 2021 to reflect the cost of acquiring the license.

A mass medium with only five commercial TV broadcasters

We believe the risk of BEC not operating the Channel 3 frequency after concession expiry is low

08 September 2011


Figure 18: Thailand�s concentrated TV broadcasting landscape BTO Annual Viewership TV ADEX ADEX concession concession share (%) share (%) share (%)Channel License Owner Operator Expiry fee (1H11) (1H11) (1H11)

Channel 3 MCOT (66% MoF) BEC 2020 min Bt188 mn/yr until 2020 29% 27% 17%

Channel 5 Royal Thai Army Royal Thai Army n/a n/a 7% 18% 11%

Channel 7 Royal Thai Army Bangkok Broadcasting & TV Co. (BBTV) 2023 est. ~1.5% of revenue 48% 32% 20%

Channel 9 MCOT (66% MoF) MCOT n/a n/a 9% 20% 12%

Channel 11 PM's Office Public Relations Dept. n/a n/a 2% 4% 2%

TPBS PM's Office Public Relations Dept. n/a n/a 5% 0% 0%

Top 2 77% 59% 36% Top 3 86% 79% 49%

Source: Company data, Commission Ministry of Culture

Advertisers are captive spenders when it comes to TV ADEX in Thailand because the top three (out of six) channels hold an 86% share of all-day and primetime (20:30 to 22:00) viewership and 79% of all TV ADEX (Figure 19). In terms of viewership, the top three commercial TV broadcasters increased share from 75% to 86%, but the move was primarily driven by Channel 3 (BEC) (+6.1 pp) and Channel 7 (+5.9 pp) while Modernine TV (MCOT) saw a 1 pp decline in share. This is a function of the higher investment in content by both Channel 7 and Channel 3.

Figure 19: Viewership share trends of TV broadcasters All-day programming

0%5%

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Ch. 7 Ch. 3 Modernine TV Ch. 5 TPBS (form. iTV) NBT

17.3 p.p. Gap

17.1 p .p. Gap

20.8 p .p. Gap13.8 p.p. Gap


To the credit of the commercial TV broadcasters, their share of viewership, TV ADEX and ADEX has increased substantially over the past 6+ years. They have consolidated their leadership and grasp on ADEX through enhanced utilisation of airtime and investment in programming. Top three TV ADEX share has increased from 63% in 2005 to 79% currently, while there has been a comparable rise in ADEX share from 37% to nearly 50% currently (Figure 20). The termination of the commercial ITV (former broadcaster of Shin Corp.) in 2008 obviously had a positive impact. During this period, TV ADEX and ADEX posted annual growth rates of 4.5% and 3.5%, respectively; however, the three leading commercial TV broadcasters grew their TV advertising revenues twice as fast at 8.3% annually.

Top three TV channels have 86% of the audience. BEC�s channel 3 continues to break away from MCOT�s Modernine TV

Power has been consolidated at the top with share of TV ADEX up to 80%

08 September 2011


Aside from stronger pricing power, the fact that the three leading commercial TV broadcasters control 50% of advertisers� annual budgets in Thailand is a formidable barrier to entry for a new channel(s) and/or form of medium. When debating the threat of multichannel (which we discuss later in the report), it is important to remember the level of control TV has on ADEX.

Figure 20: Consolidated grasp of TV and total ADEX among leading TV broadcasters

0%

10%

20%

30%

40%

50%

60%

70%

80%

1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11

Top 3 % of TV ADEX Top 3 % of Total ADEX

Conversion of ITV to TPBS

Source: AGB Nielsen Market Research

Top three TV channels� 50% share of ADEX is a higher barrier to entry in addition to enabling strong pricing power

08 September 2011


Brand fragmentation � long-term growth driver We believe the most powerful and sustained structural driver of ADEX growth in Thailand is higher long-term brand fragmentation. As the economy matures, real private consumption (PCE) remains healthy and income levels rise, consumers will naturally develop broader and more sophisticated product preferences. This creates greater opportunities for brand owners that are not already in the market to enter, and for brand owners that are already in the market to broaden their product portfolios through new brand launches and/or brand extensions. The evidence of this has been somewhat subtle over the past 3.5 years, but this is a long-term trend, which should support a healthy level of ADEX growth 2-3x higher than both PCE and GDP growth.

Since 2008, the top ten band owners have increased their share of ADEX by 280 bp from 18.4% to 21.2% (Figure 21). At the same time, the share of the top ten brands has stayed flat at 7.4%. Therefore, this implies that the leading brand owners such as Unilever NV (UNc.AS, Eu 23.64, UNDERPERFORM, TP Eu 21.50), Procter & Gamble Co. (PG, $62.55, OUTPERFORM, TP $70.00) and Toyota Motor Corp. (7203, ¥2,711, NEUTRAL, TP ¥2,980, OVERWEIGHT) are increasing their spend at a faster rate than ADEX, but the incrementally higher spend is not going into the top ten brands, but rather into a broader product portfolio. We do not see any reason to believe this trend will not continue.

From a growth perspective, ADEX by the top ten brand owners has increased 16% p.a. since 2008, while the annual growth rate for the top ten brands is less than half at 7.3% annually. This highlights that incremental spend is being invested into a broader number of brands.

Advertisers realise that in order to gain market share in the faster-moving emerging Asian markets, they cannot do it solely with existing brands, but rather innovate and develop more regional brands that better suit local consumers.

Figure 21: Brand owners spending incremental ADEX on broader brand portfolios Share of ADEX

18.4%20.1%

22.3% 21.2%

7.2% 7.1% 7.5% 7.4%

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2008 2009 2010 2011 YTD

Top 10 Brand Owners Top 10 Brands

Growth has been > 2x faster for brand owners than individual brandsLikely to be higher after seasonally strong 4Q


Proliferation of new brands and brand extensions are the primary long-term structural drivers behind brand owners spending more on Thai ADEX

Top ten brand owners represent a larger proportion of ADEX, but are spreading the spending across a larger base of brands/products

Incremental ADEX is primarily going into new brands/brand extensions

08 September 2011


In a recent study by Nielsen, they found that the fast-moving consumer goods (FMCG) sector in Thailand grew 6.4% in 2010, which was below average for APAC. Volume growth of 5.4% was healthy, but value growth of 1% was well below the APAC average (Figure 22). The lower growth was a function of hypermarket price competitiveness and the Thai�s increasing propensity to find value. This being said, one of the most effective ways for brand owners to boost value is through new product launches.

Figure 22: FMCG growth trends across APAC 2010 YoY growth

27.3%

14.4%12.6%12.1%11.8%

7.7%6.4%6.2%5.5%4.2%4.2%3.2%2.4%

0%

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30%

TW NZ AU KR SG MA TH HK ID PH CH IN VN

Value Volume FMCG sector

Source: Nielsen Retail Index

Strong ADEX growth driven by long-term brand fragmentation plays well into a broadcasting industry where the balance of power is tilted in favour of TV broadcasters. More ADEX spending should continue to shift to lower-cost advertising such as the internet, but it only represents 0.4% of ADEX and most of the marginal cannibalization will be felt by the newspaper and radio media.

FMCG volume growth is higher than value � positive for new brand introductions

Growth in online advertising will likely cannibalize newspaper and radio

08 September 2011


Foundation set for robust ADEX growth We believe the right drivers are in place for above-trend ADEX growth in Thailand to continue. We forecast annual growth over the next three years will be 11%, which is materially above the ten-year trend of 8%. Prior to the global financial crisis (GFC), Thailand�s ADEX was growing at an annual rate of 10.4%, so essentially, we believe ADEX growth will revert to pre-GFC levels. Year-to-date (July) ADEX in Thailand is 11.5% above 2010 (Figure 23).

Figure 23: ADEX trends in Thailand (Bt bn)

30 33 37 42 47 50 53 61 65 67755

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2000 to 2010 Total ADEX CAGR = 8.3% 2010 to 2012E Total ADEX CAGR = 10.7%

Source: AGB Nielsen Media Research, Credit Suisse estimates

The key catalysts, which are inexplicitly linked, behind our expectations for robust ADEX growth in 2011 and 2012 are:

(1) Private consumption � Credit Suisse economist Santitarn Sathirathai expects private consumption to be the primary a major contributor to GDP growth in both 2011 and 2012 with the growth picking up in 2012. ADEX is highly correlated to both consumer confidence (70%) and private consumption expenditure (63%).

(2) Thaksinomics Part II � Pro-consumption policies by the new Pheu Thai government are expected to boost consumer confidence and private consumption expenditure in 2012. It could be déjà vu as Thaksinomics Part I proved to be highly beneficial to consumer and ADEX trends.

Positive impact from pro-consumption fiscal policies Healthy mix of pro-consumption �Thaksinomic� fiscal measures, accelerating wage growth, moderating inflation and stable to potentially lower interest rates should drive both PCE growth and consumer confidence (CCI) higher in 2012.

Based on recent GDP, inflation and PCE data, we expect 2H11 ADEX growth to moderate as signs of a softening growth trend have emerged, likely stemming from weaker global demand. However, we believe boosts to domestic demand from fiscal policy are forthcoming, and the impact will drive stronger ADEX trends in 1H12 versus 2H11. Our forecasts are outlined in Figure 24 below.

Expect ADEX to grow above trend, by 11% p.a.

YTD trends are strong

Private consumption is expected to represent the largest component of GDP growth

Pro-consumption �Thaksinomics� has a history of boosting ADEX

Pro-consumption policies should have a greater impact in 2012

Expect 2H11 ADEX growth to moderate briefly, but then pick-up steam heading into 2012

08 September 2011


Figure 24: Thailand macro and ADEX forecasts Forecasts (%) (mn) 2007 2008 2009 2010 1Q11 2Q11 3Q11E 4Q11E 2011E 2012EReal GDP (YoY) 5.0% 2.5% -2.3% 7.8% 3.2% 2.6% 4.6% 3.7% 3.5% 4.1% Private consumption Expenditure (YoY) (%) 1.8% 2.9% -1.1% 4.8% 4.3% 4.3% 4.0% 5.0% 3.8% 4.5% Contribution to real GDP (%) 35.9% 73.5% 2.0% 38.6% 64.6% 89.9% 55.3% 57.1% Total advertising Expenditure (Bt mn) 92,151 90,122 90,217 100,128 25,171 27,449 27,353 30,484 110,457 122,608 YoY change (%) 2.6% -2.2% 0.1% 11.0% 11.5% 12.0% 8.0% 10.0% 10.3% 11.0% % of nominal GDP 1.1% 1.0% 1.0% 1.2% 0.9% 1.0% 1.0% 1.1% 1.0% 1.2% TV advertising expenditure (Bt mn) 53,491 51,137 52,935 60,735 15,597 16,891 16,549 18,595 66,827 75,404 YoY Change (%) 0.0% -4.4% 3.5% 14.7% 12.8% 10.8% 7.8% 14.0% 10.0% 12.8% % of ADEX 58.0% 56.7% 58.7% 60.7% 62.0% 61.5% 60.5% 61.0% 60.5% 61.5%

Source: Bank of Thailand, AGB Nielsen Media Research, Credit Suisse estimates

Our Thailand economist (Santitarn Sathirathai) recently lowered his 2011E PCE growth forecast from 4.5% to 3.8%, but offset this with an increase in 2012 from 3.9% to 4.5%. Essentially, the view is that pro-consumption policies will play a larger role in 2012 and help to partially offset the expected weakness in exports (Figure 25). The uptick in growth expected for 2012 should have a positive impact on ADEX.

PCE contribution to real GDP growth is expected to increase from 39% in 2010 to 55% in 2011 and to 57% in 2012 (Figure 26). PCE is expected to be the primary driver behind the improvement in GDP growth. With PCE being a stronger growth driver to overall real GDP growth, advertisers are likely to increase ADEX accordingly.

Figure 25: Private consumption is a key driver of GDP Percentage points

Figure 26: Private consumption is a key driver of GDP growth

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More than 50% of GDP growth forecas t to come

f rom private consum pt ion

Source: Bank of Thailand, Credit Suisse estimates Source: Bank of Thailand, Credit Suisse estimates

Link to consumer confidence CCI is a statistically important indicator of ADEX with a correlation of 70% over the past 11 years. CCI levels continue to be at peak levels post the global financial crisis (Figure 27), and given the pro-consumption measures of the Pheu Thai government (higher minimum wages, automotive incentives, rice price subsidies and higher oil subsidies), we believe consumer sentiment is well supported. Concerns about higher inflation eroding CCI are real in the immediate term, but based on our economic team�s forecasts, inflation should moderate in 2012. We believe CCI supports our expectations for continued robust growth in PCE and ADEX (Figure 28).

Uptick in 2012E PCE growth should support higher ADEX growth rate next year

PCE to contribute 55% and 57% to GDP growth in 2011 and 2012, respectively

70% positive correlation between consumer confidence and ADEX growth

08 September 2011


It is interesting to note that during Thaksin Shinawatra�s first 2.5 years as Prime Minister (1Q01 to 4Q01) the CCI index increased nearly 30 points to a record high of 110. This was on the back of several key pro-consumption policies.

Figure 27: Thailand CCI has positive momentum Consumer Confidence Index level

Figure 28: ADEX highly correlated to CCI YoY %

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2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11

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behind it

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Consumer Confidence ADEX Growth

Correlation = 70%

Source: Bank of Thailand Source: Bank of Thailand, AGB Nielsen Media Research

Déjà vu � Thaksinomics Part II �Thaksinomics Part I� provided a boost to CCI, PCE and ADEX growth during Thaksin Shinawatra�s tenure. Over his entire tenure as Prime Minister, ADEX increased by an average quarterly rate of 10.4% YoY; however, during the first 18 months, growth reached a high of 25% YoY and averaged 14% during his first three years (Figure 29). We are not suggesting Thaksinomics Part II will provide the same boost, but given the policy similarities in promoting domestic consumption, there is at least a reasonable probability that ADEX growth picks-up pace (Figure 30).

Figure 29: Thaksinomics Part I was very good for ADEX YoY

Figure 30: 2012 PCE pick-up is a key catalyst to ADEX YoY

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11%14%17%20%23%26%29%

2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11

PCE Growth ADEX Growth

Correlation = 63%Thaksinomics Part I

-10%

-7%

-4%

-1%

2%

5%

8%

11%

14%

17%

1Q06

2Q06

3Q06

4Q06

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3Q07

4Q07

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2011

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Correlation = 65%

Source: Bank of Thailand, AGB Nielsen Media Research Source: Bank of Thailand, AGB Nielsen Media Research, Credit Suisse estimates

Thaksinomics Part I was a big boost to consumer confidence

ADEX increased at an average of 25% for the first six quarters when Thaksin first took office

08 September 2011


The beginning of a regulated era After waiting for 14+ years, it appears that Thailand�s broadcasting industry is on the verge of having a regulator with the powers to establish and oversee a competitive framework for private and public broadcasters alike. The National Broadcast and Telecommunications Commission (NBTC) should be formed by the end of 2011 but the Broadcasting Commission and Broadcasting Master Plan to regulate radio and TV broadcasting may not be in place until 2H12; therefore, the impact on free-to-air (FTA) broadcasters may become evident in 2013 at the earliest. Given the 50% stronghold on ADEX by the top three TV channels and the popularity of their owned content, it will not be an easy grab for new FTA, cable and or satellite licensees to steal market share.

In our opinion, the short- to medium-term impact is positive because a competitive framework and a powerful regulator will allow existing broadcasters such as BEC and MCOT greater clarity on key operating issues, gauge the competitive threats and invest in new growth opportunities that come about from NBTC�s Broadcasting Master Plan.

With respect to new growth opportunities, investors can look forward to BEC and MCOT having better visibility on how they can invest their combined cash position of Bt9 bn behind existing and new media. Among them, we believe BEC�s higher cash position, profitability and free cash flow generation position it better for new investment opportunities. We expect BEC�s growth investments to be targeted more towards, content and new channels, whereas we expect MCOT to invest more heavily in network infrastructure for multi-platform broadcasting and digital TV. MCOT�s radio operations (16% of revenue) face higher risk than TV in the near term once the NBTC is functional.

Can this really be true � NBTC is here? It has been 4+ years in the making, but it appears that the NBTC has finally arrived. Figure 31 is a quick timeline of the major events leading up to today:

Figure 31: Recent timeline of events leading up to the formation of the NBTC Date Event and key points August 2007 Referendum vote in favour of new Constitution of Thailand • This new constitution succeeded the 1997 constitution and 2006 interim constitution March 2008 Thai Public Broadcasting Act enacted

• By virtue of the new constitution, the Radio Broadcasting and Television acts from 1955, 1959, 1978 and 1987 were deemed unconstitutional

• Establishment of broadcast industry's own regulator (NBBTB) and to enact a Broadcasting Master Plan • NBBTB to replace the National Telecommunications Commission • Under the Broadcasting Master Plan all radio and TV station operators are subject to license • Existing concession operators will not be subject to license requirement and can continue until agreements end • Cable & Satellite permitted to sell advertising to max. 6 minutes per hour

December 2010 National Broadcasting and Telecommunications Commission Act

• Establishment of broader regulator (NBTC) with regulatory powers over broadcasting, satellite and telecommunications• NBTC to establish the Broadcasting Commission and Telecommunications Commission • 11 independent commissioners: radio (1), TV (1), telecommunications (2), legal experts (2), economists (2), consumer

protection (1), telecom expert (1), education (1), culture (1) and social development (1) • Selection of commissioners by the Senate through secret ballot • NBTC to form: Frequency Management Master Plan, Table of Frequency Allocations, Broadcasting Master Plan,

Telecommunications Master Plan, Frequency Plan and Telecommunications Numbering Plan • License frequencies for radio and TV broadcasting • Set regulation on M&A, cross-holdings and market concentration • Spectrum auctions for new licenses and to set licensing fees to be paid into NBTC R&D Fund

June 2011 Senate Secretariat receives shortlist of 44 -- has 30 days to send to the Senate August 2011 Department of Special Investigation probes alleged irregularities in NBTC selection process September 5, 2011 Senate selected 11 NBTC commissioners by secret ballot

Source: Office of the Council of the State of Thailand, media reports

The 14+ years wait is over but NBTC action is expected in 2H12 and impact in 2013 at the earliest

Near-term impact is positive because regulator is necessary for an orderly competitive framework that promotes media growth

New regulation should promote new growth opportunities for strong TV broadcasters such as BEC and MCOT

Senate selected 11 commissioners on 5 September 2011

08 September 2011


There are plenty of hurdles still to clear before there is a conducive and stable regulatory environment. The Senate�s 11 voted commissioners are still subject to legal challenges in addition to current legal challenges and the Department of Special Investigation�s inquiry into the entire selection process. There is still uncertainty surrounding the composition of the NBTC prior to approval by The King.

Assuming there are no changes to the voted commissioners, they have 15 days to select a Chairman and Vice-Chairman. Following this, the NBTC must select the Broadcasting and Telecommunications sub-commissions. Once the sub-commissions are established, there will likely be the establishment of sub-committees before the real work of setting the Master Plans starts. In setting the Master Plans, the NBTC must conduct public hearings and a referendum before it can put any official regulation in place.

Adding all this together, the establishment of the NBTC is likely only the first step in a long, bureaucratic road to clarity on the regulatory front. Any new regulation permitting new entrants in TV broadcasting could still be 9-12 months away.

We see very limited downside to BEC and MCOT earnings in the next 12 to 24 months because of the formation of the NBTC, and the result in our opinion, is a stronger broadcasting industry that has an effective competitive framework that will facilitate higher overall growth. The leading TV channels with their stronghold on ADEX will likely be among the early benefiters from a strong broadcasting industry.

So what should we expect? Trying to predict what a regulatory body � that has yet to be officially formed � is going to do is a perilous exercise. However, the following are some of the topics that we believe will affect BEC and MCOT the most, and in our best guess the order of timing from the soonest to the latest. Again, we do not expect any economic impact (positive or negative) until 2013 at the earliest.

(1) Redistribution of radio broadcasting frequencies � this could entail repealing existing and/or expiring frequency licenses, auctioning new licenses and assigning license fees on all license owners.

(2) Enforce that license owners must operate the frequency. Existing concession agreements (BEC and BBTV) are likely to be exempt until their expiry as is the case currently.

(3) Transform the current National Army�s Channel 5 to non-commercial and operate as a public service board. Channel 5 currently has 17% share of TV ADEX. We do not expect BBTV�s concession agreement for Channel 7 (also owned by the army) to be jeopardised prior to its expiry in 2023. The heavy representation on the NBTC by commissioners from the army will heavily sway what happens to Channel 5 and 7.

(4) New annual licensing fees of not more than 2% on income before expenses for all license owners.

(5) Issuing one or two new FTA channel licenses. One could be a digital TV platform (high barrier to entry with cost in excess of Bt5 bn).

(6) Auctioning of new subscription cable channel licenses.

(7) Broadcasting Act of 2008 allows for a possible change in satellite and cable channel allowable advertising time from 6 minutes/hour currently. However, the amount cannot exceed that of FTA.

(8) New M&A framework.

(9) Establish the roadmap for the rollout of digital broadcast TV (DTTV). ASEAN nations are expected to move to DTTV completely by 2015. Rollout of DTTV is a multi-year undertaking and we believe 2015 may be too ambitious of a target for Thailand. One of the new FTA channel licenses we mention above could be the first digital TV

Path to a broadcasting master plan is anything but clear and potential for legal and political hold-ups

Master plan is not expected until 2H12

Earnings and dividends will be held up in the interim as broadcasters enjoy ADEX trends

Radio frequency reallocation, transforming army licenses and new licensing fees are likely high on the NBTC�s to-do list

One or two new FTA licenses are likely if Army licenses are de-commercialized

Not clear that cable and satellite will get more ad time � opposite could happen

Digital TV rollout � meeting 2015 ASEAN agreement looks unlikely

08 September 2011


platform, but capital cost for such a channel would be north of Bt5 bn for the broadcaster alone, not to mention set-top box costs for consumers.

New FTA licenses are not certain threats As we mention above, the NBTC could issue 1 to 2 new commercial FTA licenses that may compete directly with Channel 3 and Modernine TV. This being said, we expect the net impact to be moderate is it should come on the back of de-commercializing the Army�s Channel 5, so the net impact for ADEX would be one new channel. The incremental new channel is expected to be digital, which is an important first step for the roll-out of DTTV.

New FTA licenses does not necessarily mean market share and ADEX share losses for BEC and MCOT because the incumbent broadcasters are positioned well do play a key role in the auctions. We expect BEC to be active in acquiring new channels for convergence of its content with broader distribution. New FTA licenses presents a growth opportunity for both, but more so for BEC.

Radio presents a more near-term concern for MCOT We expect the NBTC�s Frequency Allocations and Broadcasting Master Plan to have a more disruptive and more near-term impact on radio broadcasting. There are over 500 radio frequencies owned by the government in Thailand, and the industry operates at low profitability due to the lack of a competitive framework. This partially explains why radio�s share of ADEX is only 5.5% YTD and has been in constant decline for the past decade. With the new constitution in 1997, the National Broadcasting Commission was supposed to be established. This failed to happen, so radio licenses expired and have since been renewed on short-term one-two year contracts.

We believe the NBTC will look to restructure the radio industry, which could lead to large radio frequency licensees having some licenses repealed. The NBTC will look to build a competitive framework for radio by issuing permanent licenses where private players can also compete on a more level playing field. Radio needs the NBTC�s more immediate attention than TV.

MCOT owns 62 radio stations, has concession agreements on 5 to BEC (only 2 operate), and generates 14% and 10% of its revenue and operating profit from radio, respectively (Figure 32). On the other hand, BEC�s exposure to radio is 2% for revenue and less than 1% to operating profit (Figure 33). In 2013, we could see a material decline in MCOT�s earnings from losses of radio licenses.

Figure 32: MCOT is more susceptible to radio license rationalisation (Revenue in Bt mn)

Figure 33: BEC radio operations are small(Revenue in Bt mn)

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Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

We could see one (net) new commercial FTA licenses in the market

Expect BEC to play a key role in any new FTA license auctions

Radio needs to be dealt with early. NBTC is likely to repeal many of the 500+ radio frequencies and redistribute. Current radio licenses are not long-term viable

MCOT�s 62 radio licenses and 14% of its revenue in radio. BEC�s exposure is small

08 September 2011


Multichannel is not the Trojan Horse In our view, multichannel (free, digital, cable and satellite) competition is a long-term theme that will result in greater fragmentation of ADEX share. However, it is no Trojan Horse catching the industry by surprise.

Discussions of multichannel threat has dated back at least 14 years to 1997 when the proposal to set-up a national broadcasting commission was proposed in the previous Thai constitution. This is not a new threat that TV broadcasters have not been preparing for.

Given that satellite and cable piracy continues to be widespread, the lack of transparency into viewership statistics will keep advertisers wary of its effectiveness.

The truth of the matter is cable and satellite penetration in Thai homes has increased from <5% in 2000 to 50% currently, but attracts only 3% of ADEX. The top three FTA channels control 50% of ADEX. In addition, the viewership share of the top three channels is at record levels of 78% where owned popular programming and strong primetime Lakorn (soap operas) programmes cannot be easily replicated or surpassed by new entrants.

We believe multichannel presents an interesting growth opportunity for the conventional TV broadcasters because new analogue and digital channel development will provide new distribution for existing and new content. BEC is best positioned to capitalise on multichannel for growth, in our view.

Investors should be cautious about not pricing in multichannel risk into BEC and MCOT too early. New channel growth could be more than offset any potential cannibalization on their FTA channels. On a relative basis, MCOT�s Modernine TV channel is more susceptible because of its Edutainment programming that is weaker in primetime, and its considerably lower investment in proprietary content.

Cable and satellite reach 49% of TV households in Thailand � Growth in cable and satellite television users has been very rapid and multichannel penetration is at 48% (Figure 34), which is comparable to the APAC average; however, this is still below developed Asian markets such as Singapore at 65% or Hong Kong at 84%. Multichannel penetration is expected to reach 69% in 2013, based on AGB Nielsen estimates.

Figure 34: Cable and satellite television penetration in Thailand Households in mn; penetration in %

2.3 3.0 3.86.4

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Source: AGB Nielsen Media Research, CASBAA, ATAC

Multichannel threat is not new and TV broadcasters have been preparing

Poor local content will keep TV ADEX share low. Opportunity for local content on new channels

BEC is in a good position to use multichannel threat as a growth opportunity

Do not price in multichannel cannibalization too early � would neglect new growth drivers

Multichannel penetration is above APAC averages and moving higher

08 September 2011


It is important to note that higher penetration of cable and satellite has a positive impact on viewership and ADEX share for the FTA channels. We believe the majority of viewing in multichannel homes is local content (news & entertainment), especially during primetime, from FTA channels such as Channel 3, Channel 7 and Modernine TV. Higher viewership numbers for FTA channels puts upward pressure on advertising rates and their revenue.

Satellite (both Ku-Band and C-Band) with no monthly fee accounts for the largest proportion (51.4%) of the users, while the rest are shared between the only nationwide Pay TV operator in Thailand, TrueVisions, owned by True Corp PCL (TRUE.BK, Bt4.00, UNDERPERFORM [V], TP Bt2.85) and by ~500 local (425 operate illegally) cable operators (Figure 35). Illegal cable operators have become important competitors because they have broad reach and offer low subscription rates. These operators will transmit through cable lines that they run along power or telephone poles to reach subscribers in rural villages. As a result, nearly 50% of �subscribers� are located in rural markets with only 17% located in Bangkok (Figure 36).

Figure 35: Satellite and cable by subscriber (mn) Figure 36: Rural subscribers (mostly non-paying) are the highest subscriber numbers in �000s

TrueVisions, 17%

Local cable, 36%

Satellite (C+ Ku), 47%

638 930 1,282 1,5751,315

1,5872,169

3,176719

1,429

2,922

4,579

0

1,000

2,0003,000

4,000

5,000

6,000

7,0008,000

9,000

10,000

2007 2008 2009 2010

bangkok Urban Rural

CAGR = 52%

Source: Company data, AGB Nielsen Media Research, Credit Suisse estimates, ATAC


� driven by improving affordability, content development and political unrest � We believe there are three key driving factors behind the growth of multichannel in Thailand.

(1) The price of satellite dish hardware has declined significantly due higher competition from providers in the sector. The price for a Ku-band dish with no monthly fee (40-80 channels) is less than US$150 including installation fee while a C-band dish (> 100 channels) price could start from ~US175, a significant decline from an entry price of more than US$300 a few years ago. For local cable services, the upfront fee could start from Bt500 (US$17) with a monthly fee starting from Bt250 (US$8).

(2) Content development for alternative televisions has improved over recent years: more foreign content and sports programming. On TrueVisions, 200 available channels provide more content across all genres.

(3) Satellite and cable TV have become an increasingly popular forum for political propaganda, especially during the five years of unrest since the 2006 coup.

But most is from illegal operators that advertisers cannot spend behind

Higher multichannel penetration improves viewership of FTA channels

Low hardware and subscription costs, more foreign content and propaganda forums have fuelled multichannel penetration

08 September 2011


� but still very small in terms of advertising expenditure share due to various limitations Cable and satellite only accounted for 5% of 2010 TV ADEX

Despite the strong growth in the number of satellite and cable TV users, TV ADEX into the medium was ~Bt3 bn, lower than other common mediums such as outdoor, cinema, magazines and radio. Sure one can argue that it is a medium in its infancy because the

Broadcasting Act of 2008 was the first to allow advertising to a maximum of six minutes per hour. However, we believe there are more structural limitations that have and will continue to prevent TV ADEX become more material. This is where the NBTC will play a vital role.

(1) Local content is inferior, especially during primetime. FTA broadcasters (Channel 3, Channel 7 and Modernine TV) have invested more heavily in content and dominate the local primetime slots with their successful Lakorns.

(2) Too many channels with mediocre content does not draw loyal viewers or advertisers. This also prevents advertising rates for cable and satellite from moving higher. It is the opposite argument we have been making for FTA broadcasters � high fragmentation of channels shifts the balance of power in favour of the advertisers.

(3) Perhaps most importantly there has not been any comprehensive statistical study or analysis to monitor the number of viewers or their behaviour for satellite and cable TV. There are pilot projects by Nielsen with small sample sizes, but the high subscriber count in rural areas makes it challenging to deploy a high number of metering devices. It poses problems for both providers with respect to pricing and for advertisers with respect to gauging the effectiveness.

Multichannel environment is not an immediate financial threat � Multichannel share to primarily cannibalise radio and newspaper

We believe that in the near to medium term, higher cable and satellite ADEX will actually increase total TV ADEX rather than cannibalize the FTA players. As the only mass medium in the market, advertisers will be keen to expand their advertising in TV at the expense of radio and newspapers.

As the largest player in the market and with the broadest programme offering, TrueVisions has generated Bt563 mn in advertising revenue over the past 12 months. This is only 0.9% of total TV ADEX over the same period. In other words, the largest cable and satellite TV operator�s share of TV ADEX is 1/86th that of the three leading FTA channels. We do not envision such a small player in terms of advertising spend being able to cannibalize the much larger holders of market share especially when we consider that airtime is limited and ratings during the primetime periods is lower. Cable and satellite ad rates are lower and reach a wider audience than both newspaper and radio, but do not make a compelling substitution to the only mass medium in the market � FTA TV.

If we assume that cable and satellite ADEX increases at 35% p.a. until 2012, it would reach Bt6 bn or 8% of our TV ADEX forecast and be the fifth largest medium for advertisers.

Keep in mind that we believe BEC will be both a bidder for new and supplier of content to new and existing cable channel. Therefore, they will have a direct and an indirect exposure to the growth potential in subscriber and advertising revenues.

Multichannel collects only 3% of ADEX

Structural limitations behind multichannel ADEX growth. Weak local content, too many channels and poor measurement capabilities are all big deterrents to advertisers

We expect cable and satellite to be incremental for TV ADEX

The largest �official� cable and satellite player has a tiny share

May reach 8% of TV ADEX in 2012

We expect BEC to play an active role in converging content with new distribution through development of new channels

08 September 2011


Asia Pacific / ThailandRadio & TV Broadcasting

BEC World (BEC.BK / BEC TB)

On the starting grid for media convergence ■ Ideally positioned for growth. We initiate coverage on BEC with an

OUTPERFORM rating. We expect earnings to continue to benefit from the structural nirvana of Thai broadcasting and robust ADEX growth; plus, BEC has the balance sheet, content and distribution to capitalise on incremental growth opportunities in the new era of NBTC. We believe new growth will primarily come from converging proprietary content with broader distribution, and BEC has a strong track record on both the fronts.

■ Multi-faceted domestic consumption story. In a pro-consumption environment that we believe will become more appealing in 2012, BEC offers direct exposure to consumer trends and it is on the starting grid for an orderly evolution of Thai media. There are compelling opportunities in converging content with broader distribution. As the country�s biggest backer of content and a large library to show for it, and the financial capabilities, we believe BEC will lead the convergence movement in Thai media.

■ The 14+ years wait is over. The broadcasting industry now has a regulator with the power to implement and oversee a competitive framework that will allow strong media companies such as BEC to deploy capital through convergent strategies. Investor trepidation should ease, as we believe that the impact of NBTC will be visible in 2013 at the earliest. No immediate impact from NBTC will likely be a catalyst for BEC. In the meantime, positive earnings and dividend surprises are highly probable, given strong ADEX growth trends in the market.

■ Yield + growth. With a payout ratio of nearly 100%, BEC has always been a compelling yield investment. However, we believe the valuation on the shares will start to better reflect the growth potential. We expect dividend growth in the near term to accelerate. With a high cash position and no debt, the dividend is not likely to be sacrificed in order to pursue growth investments. With the highest ROIC in global broadcasting, BEC would be wise to deploy more capital. This could depress returns in the near term, but long-term valuation multiples should move higher on the added element of growth.

Share price performance

0204060

Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11100120140160

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the THAILAND SET IDX which closed at 1066.96 on 07/09/11 On 07/09/11 the spot exchange rate was Bt29.96/US$1

Performance Over 1M 3M 12M Absolute (%) 0.6 20.6 21.5 Relative (%) 1.7 15.7 6.0

Financial and valuation metrics

Year 12/10A 12/11E 12/12E 12/13ERevenue (Bt mn) 11,713.8 13,276.2 15,191.5 16,484.7EBITDA (Bt mn) 6,461.7 7,644.7 8,949.8 9,859.4EBIT (Bt mn) 4,705.6 5,719.8 6,681.7 7,241.2Net income (Bt mn) 3,303.0 3,989.9 4,633.9 5,012.8EPS (CS adj.) (Bt) 1.65 1.99 2.32 2.51Change from previous EPS (%) n.a. Consensus EPS (Bt) n.a. 1.92 2.20 2.49EPS growth (%) 25.4 20.8 16.1 8.2P/E (x) 24.8 20.6 17.7 16.4Dividend yield (%) 3.5 4.5 5.3 5.7EV/EBITDA (x) 11.9 10.1 8.6 7.8P/B (x) 10.8 10.4 10.0 9.6ROE (%) 44.6 51.5 57.7 60.1Net debt/equity (%) net cash net cash net cash net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates.

*Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months.

Research Analysts Karim P. Salamatian, CFA


Rating OUTPERFORM* Price (07 Sep 11, Bt) 41.00 Target price (Bt) 52.00¹ Chg to TP (%) 26.8 Market cap. (Bt mn) 82,000 Enterprise value (Bt mn) 77,246 Number of shares (mn) 2,000.00 Free float (%) 55.0 52-week price range 42.3 - 29.0

08 September 2011


Financial summary Figure 37: BEC � financial forecasts Key Operating MetricsY/E Dec, Bt mn FY09A FY10A FY11E FY12E FY13E FY14EYoY ADEX growth 0.1% 11.0% 10.3% 11.0%YoY TV ADEX growth 3.5% 14.7% 10.0% 12.8%Blended TV ad. Rate (Bt/min) 115,303 132,923 150,801 165,888 179,406 181,200EBITDA margin 61.6% 55.2% 57.6% 58.9% 59.8% 59.0%EBIT margin 42.2% 40.2% 43.1% 44.0% 43.9% 41.3%Net ROIC 37.8% 45.7% 54.1% 60.6% 61.4% 55.3%DPS (Bt) 1.30 1.45 1.86 2.17 2.35 2.25P&LY/E Dec, Bt mn FY09A FY10A FY11E FY12E FY13E FY14ERevenue 8,949 11,714 13,276 15,192 16,485 16,807OPEX (3,432) (5,252) (5,631) (6,242) (6,625) (6,894)EBITDA 5,517 6,462 7,645 8,950 9,859 9,913Dep. & Amort. (1,737) (1,756) (1,925) (2,268) (2,618) (2,972)EBIT 3,780 4,706 5,720 6,682 7,241 6,941Other inc./exp. 50 110 110 100 100 100Financial income 59 52 65 66 66 67Profit before tax 3,889 4,868 5,896 6,847 7,407 7,108Taxes (1,169) (1,452) (1,769) (2,054) (2,222) (2,132)Minorities (85) (113) (137) (159) (172) (165)Net income 2,635 3,303 3,990 4,634 5,013 4,810EPS (Bt) 1.32 1.65 1.99 2.32 2.51 2.41

Balance SheetY/E Dec, Bt mn FY09A FY10A FY11E FY12E FY13E FY14EProgrammes and content 1,281 1,251 1,515 1,756 2,040 2,253 Net fixed assets 1,558 1,453 1,579 1,779 2,059 2,453 Intangible assets 54 47 422 372 322 272 Other non-current assets 357 481 481 481 481 481 Cash & cash equiv. 4,442 5,243 4,758 4,715 4,621 4,544Other current assets 1,100 1,092 1,217 1,370 1,473 1,499Total assets 8,791 9,568 9,972 10,472 10,996 11,502ST debt - 32.40 4.40 4.40 4.40 4.40 Other current liabilities 1,436 1,762 1,805 1,847 1,881 1,916Total liabilities 1,436 1,794 1,809 1,851 1,886 1,920Minority interest 166 193 310 469 641 807Shareholders' equity 7,189 7,581 7,854 8,152 8,469 8,776Total liabilities and equity 8,791 9,568 9,973 10,472 10,996 11,503

CashflowY/E Dec, Bt mn FY09A FY10A FY11E FY12E FY13E FY14EEBITDA 5,517 6,462 7,645 8,950 9,859 9,913 Working capital 84 192 29 (11) 31 109 Capex (1,686) (1,594) (2,690) (2,659) (3,132) (3,530) Disposal / Retirement 13 57 - - - - Net investments 995 (109) - - - - Financing costs 65 44 65 66 66 67 Net dividend received/(paid) (2,563) (3,002) (3,717) (4,336) (4,696) (4,503) Taxation paid (1,389) (1,237) (1,769) (2,054) (2,222) (2,132) Cash flow before financing 1,036 811 (437) (44) (93) (77) Equity 7 20 - - - - Debt issued - 4 - - - - Debt repayments (3) - - - - - Free Cash Flow 1,040 836 (437) (44) (93) (77) Ending Net Cash/(Debt) 4,442 5,211 4,754 4,710 4,617 4,540

Source: Company data, Credit Suisse estimates

08 September 2011


On the starting grid for media convergence Company overview BEC is the largest listed broadcaster in Thailand because of its concession agreements with MCOT (that expire in 2020) to operate the second largest FTA TV channel (Channel 3) and 2 radio stations (FM 95.5 Virgin Hitz and FM 105.5 EAZY FM). In addition to broadcasting, the company is a leading producer of local content for TV, radio and live events. About 90% of the company�s local content is sourced in-house or through exclusive agreements.

More than 90% of BEC�s revenue comes from TV advertising sales (Figure 38), and we expect BEC revenue to account for 11% of ADEX and 18% of total TV ADEX. On a gross advertising dollar basis, Channel 3 has a 27% share of TV ADEX or 19% share of ADEX Figure 39. To put this into perspective, the number one channel by viewership (Channel 7 operated by Bangkok Television & Radio Company Limited (BBTV)) has a 31% gross share of TV ADEX. The top two TV channels in Thailand account for more than 50% of the TV ADEX and 35% of ADEX.

Figure 38: BEC revenue structure 2011E

Figure 39: ADEX share gains have been very strong Bt mn; Ch. 3 2011E & 2012E market share are 1Q11 & 2Q11

TV Advertising92%

Radio Advertising

2%

Copyright & Other2%

Live Shows4%

2011E Revenue = Bt13.3 bn

0

2,000

4,000

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16,000

2004 2005 2006 2007 2008 2009 2010 2011E 2012E0%2%4%6%8%10%12%14%16%18%20%

BEC TV Ad. Revenue (lhs)BEC share of Total ADEX (rhs)

'04 - '10 TV Ad. CAGR = 12.5% or 3x higher than total TV ADEX CAGR

Source: Credit Suisse estimates Source: Company data, AGB Nielsen Media Research, Credit Suisse estimates

Content the catalyst to viewership trends We believe BEC�s content investment will continue to drive the strongest viewership trends in the industry and lead to advertising revenue increasing at a faster rate than the overall industry. BEC is expected to continue to gain share from its content investments.

In-house and partner content investment has been the primary force behind viewership trends, and this has been led by BEC and BBTV. Over the past eight years, BEC has seen the largest increase in viewership among all channels. Second is BBTV�s Channel 7. Content investment for BEC has totalled Bt10.2 bn or Bt1.3 bn per year. Investment in content has led to 11% annual TV advertising growth since 2003, which could imply our 8% annual growth forecast is too low.

BEC operates the #2 channel and has gained share through popular proprietary content

Channel 3 holds a 27% share of TV ADEX and 19% share of ADEX. The second largest media outlet in the country

BEC has invested more than Bt10 bn in content over the past eight years

08 September 2011


Going forward, we expect content investment to increase to a run-rate of more than Bt2 bn per year; however, as a percentage of sales, it is has declined considerably because the increase in TV ADEX share for Channel 3 has increased at a faster rate on the back of positive viewership trends (Figure 40).

Figure 40: Content investment driving higher viewership and ADEX share Bt mn

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Over Bt18 bn of content investment from 2003 to 2014E


Channel 3 has increased its viewership share (all-day programming) the fastest (+340 bp), see Figure 41, over the past eight years on the back of its programming investment. Channel 7 (+300 bp) is not far behind and it primarily came in the last 12 months. Up until 2Q10, Channel 7�s viewership was down to 40.9% from 44% in 2003. Over the past 12 months, while Channel 3�s viewership has been constant at 29.9%, Channel 7�s viewership has increased by more than 600 bp. We believe this has primarily been due to strong non-prime time programming in rural/up-country markets. Channel 7 has a higher national share because it established national coverage earlier than Channel 3, thus it has a stronger viewership base in rural markets.

Over the long term, we believe BEC�s stronger prime time programming will lead to stronger viewership performance relative to both Channel 7 and Modernine TV.

In the all-important prime time viewing periods (20:30 PM to 22:30 PM) where advertising rates are the highest at 30% above pre-primetime and more than double of morning news programming, Channel 3�s viewership performance has been the strongest since ITV was terminated and over the past 12 months (Figure 42). BEC�s �Lakorn� (soap operas) programmes have higher ratings than those of Channel 7�s. Actually, over the past 12 months, both Channel 3 and Modernine TV�s primetime programming has performed better than Channel 7.

Sales growth has accelerated from strong programme line-up

Channel 3 has gained viewership share the fastest

Channel 7�s non-primetime programming has been strong of late

We believe BEC�s content is superior to that of Channel 7

Channel 3 has the strongest primetime �Lakorn� (soap operas) ratings

08 September 2011


Figure 41: Content investment has led to highest viewership share growth � All-day programming viewership share

Figure 42: � more pronounced in the vital primetime slots Primetime programming viewership share

0%

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2003 2006 Q3/07 Q1/08 Q4/08 Q2/09 2009 Q3/10 Q1/11

Channel 7 Channel 3 Modernine TV

+3.4 p.p.

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Channel 7 Channel 3 Modernine TV

Gap narrowed by 2.2 p.p. in last 12mos


Views drive ads Viewership, with primetime being more important, drives TV ADEX share. Therefore, it is natural that Channel 3�s stronger primetime performance has led to higher TV ADEX share growth than Channel 7. We believe this will continue on the back of BEC�s strong track record in content production.

Since 2008, Channel 3�s share of TV ADEX has increased by 380 bp to 26.7% in 2Q11 versus a 280 bp increase to 31.9% at Channel 7 (Figure 43). Since the termination of ITV�s commercial license in 2008, both Channel 3 and Channel 7 have enjoyed the same increase in share of TV ADEX (+420 bp) despite higher viewership numbers for both. This is mainly due to advertisers not wanting to concentrate more than 60% of TV ADEX among the top two TV channels, so the new third-ranked channel (Modernine TV) benefitted more with its share increasing moderately more at 560 bp. But, we do not believe the share of the top two TV channels will decline below 60% because they have the most popular primetime entertainment programming.

Figure 43: Captive customer with share gap narrowing TV ADEX in Bt mn; share of TV trailing 12-month TV ADEX

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TV ADEX (lhs) Channel 7 (rhs) Channel 3 (rhs) Modernine TV (rhs)

Termination of ITV (Shin Corp.) license


Channel 3�s share of TV ADEX has grown faster than Channel 7 due to primetime programming

All benefitted when ITV disappeared, though Modernine TV gained more

08 September 2011


The TV ADEX share data since 2007 highlights the appealing characteristics of TV being the only mass medium and a captive customer for Thai TV broadcasters. With few options, advertisers re-allocated ITV�s advertising revenue nearly equally among the top three channels, which led to even greater concentration for Channel 3 and Channel 7 where they now hold a 59% share of total TV ADEX. Sure, this is susceptible to decline should multichannel threats materialise, but we do not foresee a material impact until 2013 at the earliest, and we do not suggest underestimating the strength of BEC�s content to attract viewers nor its ability to invest in new growth opportunities following the implementation of NBTC�s Broadcasting Master Plan.

Strong pricing power & higher utilisation Above-trend ADEX growth, increased investment in a strong content franchise, rising viewership share, rising TV ADEX share and leading primetime programming all lead to very strong pricing power. Despite holding the number two position, we believe BEC is the de facto price leader in the market. Through a combination of rate card price increases and better utilisation of advertising capacity (10 minutes/ hour average for all-day programming; 12.5 minutes/ hour for primetime), BEC has been able to increase its average advertising rate by 11% annually since 2005.

Over the past five years, 40-50% of BEC�s annual advertising revenue growth has been from higher utilisation rates. With utilisation currently near 100% (non-primetime at 90%), growth will primarily come from higher advertising rates plus non-primetime utilisation improvements. Only 70 bp of our 7% annual advertising growth forecast comes from higher advertising time utilisation (Figure 44). This being said, utilisation rates still have room to increase above 100% in primetime (allowed 12.5 mins/hour, but all-day average cannot exceed 10 mins/hour); therefore, this could be a source of positive surprises.

Figure 44: Higher rates and utilisation have equally contributed to revenue growth Ad. rates in Bt

020,000

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Avg. All-day Ad. Rate (lhs) All-day Ad. Rate YoY (rhs)Total Ad. Revenue YoY (rhs) Utilization Benefit


Reclaiming non-prime time

BEC transformed its advertising time model from 2005 to 2010. Previously, BEC only chose to manage mainly its own prime time in order to be able to focus its resources into the highest yielding period. Non-prime time periods were largely managed under a time-sharing basis, where content providers are responsible for the supply of content while the total ad-time is split between BEC and content providers (in other words, BEC effectively pays for the content using �time� rather than �money�). Each side then has the rights to sell its allocated ad-time independently.

Captive customer has limited choices to reallocated ADEX

BEC is the price leader

Improved utilisation of non-primetime has equally contributed to growth. With utilisation high, rate increases will likely be a primary driver

BEC now owns and controls 100% of its advertising slots, which will lead to better pricing and margin performance

08 September 2011


In order to incentivise the content providers, BEC allowed them to move first in filling ad-time that attracted larger advertisers. This helped BEC optimise its resources while maintaining a good programme line-up. Revenue generated during the prime time period constituted close to 80% of its TV advertising revenue in 2005.

The process to reclaim non-primetime advertising time had a deflationary affect on margins for a couple of reasons, but one is that non-primetime rates are well below those of primetime (Figure 45). However, as non-primetime utilisation rates increased, pricing power has improved as have margins.

With highly rated news and entertainment non-prime time programming, we suspect BEC can push through higher pricing of 10-12% per year for 2011E and 2012E before falling back to 8% in 2013E and 1% in 2014E.

Figure 45: TV ad rates Channel 3 (BEC) Annual mid-point change ('07 to present) (%) Ad rates in Bt 000s Weekdays Weekends Weekdays Weekends 00.01-04.00 50k-100k 50k-180k 0.9 11.3 04.01-10.00 50k-200k 50k-280k 2.7 7.2 10.01-13.00 100k-165k 260k-370k* 7.3 13.5 13.01-16.00 100k-120k 100k-280k 0.0 1.4 16.01-20.00 175k-360k 175k-360k 8.2 6.9 20.01-24.00 290k-480k 200k-480k 2.0 3.2

* Primetime is 20:00 to 22:30. Source: Company data, Credit Suisse estimates

However, reclaiming of non-prime time changed the revenue structure of BEC along with its cost structure. Previously, under the time-share model, BEC did not have to pay for the content costs but would only enjoy the benefit from the advertising rate increase on its portion of the shared time. The reclaiming of non-prime time being complete now allows BEC to enjoy the full benefit from any future increase in advertising rate on those slots but it also means that BEC has to pay for the content costs.

We expect operating margins to improve in 2011�13E off the 2010 levels with the reclamation process complete and BEC having full control of its ad-time (Figure 46).

Figure 46: Margin hit is in the past; outlook is for positive margin expansion (Revenue and EBIT in Bt bn)

44.6% 43.8% 44.0% 44.1% 43.8% 43.1% 42.9% 42.2% 41.1% 41.2% 42.3% 43.1% 44.0% 43.9%41.3%

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Impact from ad-t ime reclamation


Non-prime time rate increases have been strong. Prime time rate increases should pick up pace

Margins have begun to recover after one-time costs in early 2010

08 September 2011


Loaded with cash, ready to deploy and still among the highest ROIC in global broadcasting Despite holding increasingly large cash balances (see Figure 47) in a declining interest rate environment, BEC still generates the highest ROIC in global broadcasting.

With interest rates so low, BEC�s entire cash balance earns so little that it is irrelevant (1%) to overall earnings. Arguments can be made that 55% of the company�s asset base does not create any value.

Figure 47: Cash is high, rates are low, BEC looking to deploy

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BEC is waiting for the NBTC to issue a clear Broadcast Master Plan, so that it can deploy the capital behind value creating investments such as:

■ Multichannel � Interested in pay & cable channel licenses. Likely to launch organically with own content;

■ Radio � Will consider acquiring radio licenses once the NBTC reallocates frequencies;

■ M&A � It is within the NBTC�s powers to establish an M&A framework that will allow consolidation that does not jeopardise public interests. Given the concentration in TV broadcasting, we suspect BEC would primarily be interested in acquiring content for pay/cable channels and/or to strengthen its existing library. GMM Grammy�s (GRAM.BK, Not Rated) television production, movie production, satellite channels, digital music and multimedia businesses could be of interest to BEC;

■ Online � Company could invest more in online initiatives to augment its ThaiTV3.com and BECNews.com. Online is small, so potential investments here will also likely be small; and

■ Satellite & Cable TV networks � The company does not seem convinced about this being an area where attractive returns can be made, so investments here are unlikely, though we cannot rule it out completely.

Without the NBTC and a Master Plan in place, it makes little sense for the company to move early on any of these opportunities. However, now that the NBTC is near its formation and we are 12-18 months away, in our opinion, from a working Broadcasting Master Plan, investors should be anticipating 55% of the company�s assets (current cash position) being deployed and creating new value.

Despite 55% of assets earnings �no� return, ROIC is still the highest in global broadcasting

NBTC will finally provide an orderly framework for BEC to deploy its largest assets behind value creating investments

Expect to see the company become more active in new growth areas in late 2012

08 September 2011


BEC�s ROIC is the second highest among global broadcasting peers, which justifies this valuation. Despite heightened concerns over multichannel threat, we believe returns will move higher over the next two years before dropping off in 2014 as a result of higher capex spend (Figure 49). Any opportunities to deploy capital as we mentioned above are not likely to occur until 2013E at the earliest and should have a positive impact on ROIC post 2014E. Essentially, we do believe BEC will maintain its rank as among the most profitable publicly listed broadcasters in the world.

By comparing ROIC to EV/IC, BEC�s valuation appears reasonable given its superior level of profitability (Figure 48).

Figure 48: ROIC among the highest in global broadcastingEV/IC vs. ROIC last 12 months

Figure 49: ROIC expected to rise despite threats IC in Bt mn

TEN SON

MCOTKT Sky life

Global Mediacom

Phoenix

SURYAAUSTAR

TV Asahi

TV Azteca

CYFROWY

AMC SUN TV

M6-Metro.

BEC

y = 16.845x + 0.3523

0

2

4

6

8

10

12

14

16

0% 10% 20% 30% 40% 50% 60%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2009 2010 2011E 2012E 2013E 2014E30%

35%

40%

45%

50%

55%

60%

65%

Invested Capital ROIC

Source: Company data Source: Company data, Credit Suisse estimates

Valuation � Bt52 12-month target price We value BEC shares on three methodologies (target value from each approach in parentheses):

(1) Dividend yield relative to ten-year Government of Thailand bonds (Bt54/share);

(2) Enterprise value to return-on-invested capital (Bt44/share); and

(3) Discounted cash flow (Bt58/share).

Our Bt52 12-month target price is determined as the simple average of the three approaches.

We do not base our target price on peer comparisons because there are very few (less than two) broadcasters around the globe that generate EBITDA margins, ROE and ROIC as high as BEC and are yet poised for growth with a net cash position such as BEC�s. For arguments sake, our view of a higher share price and multiple expansion is supported by the fact that BEC trades in line with global peers on a 2012E P/E and EV/EBITDA basis but at a dividend yield discount. We believe these relative valuations are unjustified when we consider BEC�s current and future operating environment, and the cash the company returns to shareholders.

Compelling argument versus bond yields

We believe the most appropriate way to value BEC shares is on a dividend yield basis relative to ten-year Thailand government bond yields because if we look over the past ten years, BEC has paid-out 100% of its earnings as dividends, and we do not expect this to change for at least the next two-to-three years.

Relative dividend yield presents the best valuation tool in our opinion

08 September 2011


By virtue of the large payout ratio, we do not believe relative price-to-book is an adequate measure to value BEC shares.

Over the past 11 years, the relative yield has averaged 1.03x, which is well below the current level of 1.32x (Figure 50). Since 2008, the relative yield has widened considerably due to the global slowdown (in times of recession, advertising budgets often face the first and heaviest cuts) and growing concerns over the regulatory environment. The current relative yield is at the long-term trend line. We believe that 12% annual dividend yield growth until 2014, the positive impact of NBTC over the next two years and a consistently strong balance sheet justify the relative yield trending back towards the historical average.

Figure 50: Compelling value relative to bond yields

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

August-00

August-01

August-02

August-03

August-04

August-05

August-06

August-07

August-08

August-09

August-10

August-11

BEC Yield vs. 10yr Govt. Bond Trendline (BEC Yield vs. TH 10yr Govt. Bond)

1.32x

11yr avg. = 1.03x3yr avg. = 1.43x

Average Line

Source: Factset, Bloomberg

Within a low interest rate environment, our expectation of dividend growth accelerating to 12% annually going forward versus the 7% annually over the past ten years and given more clarity on the regulatory front, we believe a target dividend yield of 4% is reasonable. Based on our 2012E forecast dividend of Bt2.17/share, this implies a value for BEC of Bt52 per share.

The most compelling ROIC in global broadcasting deserves a large premium

As we mentioned earlier, BEC�s ROIC is the second highest in global broadcasting. This alone justifies the premium valuation, we believe that as ROIC is expected to rise, it allows for higher EV/IC multiples going forward. Over the past ten years, as BEC�s ROIC has increased, so has its EV/IC multiple (Figure 51). We believe this should continue as we expect ROIC to increase until 2013. Starting in 2014, we start factoring heavier investment in channel, license, content and possible M&A opportunities that could come about following the NBTC�s Broadcasting Master Plan.

Relative to the global broadcasting universe (see Figure 52), we believe BEC shares are worth Bt44 [(10.6x 2012E IC of Bt7.9 bn plus net cash of Bt4.7 bn)/2 bn shares O/S] on the back of our 60.6% 2012E net ROIC forecast.

Relative dividend yield is trading well above historical average

Low interest rate environment is a positive and supports a lower yield

We expect ROIC to trend higher, which is a catalyst to higher multiples

08 September 2011


Figure 51: EV/IC multiples have expanded along with ROIC

Figure 52: As the gap widens, so too should the multiple EV/IC vs. ROIC last 12 months

0%

10%

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30%

40%

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60%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011YTD

0.0x1.0x2.0x3.0x4.0x5.0x6.0x7.0x8.0x9.0x10.0x

Net ROIC (lhs) EV/IC (rhs)

TEN SON

MCOTKT Sky life

Global Mediacom

Phoenix

SURYAAUSTAR

TV Asahi

TV Azteca

CYFROWY

AMC SUN TV

M6-Metro.

BEC

y = 16.845x + 0.3523

0

2

4

6

8

10

12

14

16

0% 10% 20% 30% 40% 50% 60%

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

DCF fully loaded for investment yields upside of 48%

In our DCF model, we assume six consecutive years of heavy investment prior to the concession agreement for Channel 3 expiring on 25 March 2020. In 2021, we assume a large payment of Bt6 bn, which includes Bt4.5 bn for the possibility of auction costs for the Channel 3 frequency under the NBTC�s Broadcasting Master Plan. Broadcasting frequency allocations prior to 2020 should provide benchmarks for the auction costs of a broadcasting license.

Following concession expiry, we ramp down margins to reflect a 2% fee that the company would have to pay for the existing or new FTA license. We also assume that throughout our DCF period, revenue and EBITDA growth moderate to 4% each versus the company�s nine-year historical CAGR of 9% and 7%, respectively.

Our DCF model can be seen in Figure 53.

Reflect new auction and licensing costs in our DCF post concession expiry in 2020

08 September 2011


34

Figure 53: BEC DCF valuation

(mn Bt) 2011-20302011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 . . . 2030 CAGR

Revenue 13,276 15,192 16,485 16,807 17,816 18,885 20,018 21,219 22,492 23,841 24,318 29,063 4.2%EBITDA 7,645 8,950 9,859 9,913 10,333 10,953 11,610 12,307 13,045 13,828 13,618 16,275 4.1%EBITDA Margin 57.6% 58.9% 59.8% 59.0% 58.0% 58.0% 58.0% 58.0% 58.0% 58.0% 56.0% 56.0%EBIT 5,720 6,682 7,241 6,941 7,781 8,199 8,681 9,228 10,187 11,160 11,114 14,517 5.0%EBIT Margin 43.1% 44.0% 43.9% 41.3% 43.7% 43.4% 43.4% 43.5% 45.3% 46.8% 45.7% 49.9%

Less: Adjusted Taxes (1,716) (2,005) (2,172) (2,082) (2,334) (2,460) (2,604) (2,768) (3,056) (3,348) (3,334) (4,355)

NOPLAT 4,004 4,677 5,069 4,859 5,447 5,739 6,077 6,460 7,131 7,812 7,780 . . . 10,162 5.0%

Working Capital 29 (11) 31 109 0 0 0 0 0 0 0 0Depreciation 1,925 2,268 2,618 2,972 2,552 2,755 2,929 3,079 2,858 2,668 2,504 1,758Capex (2,690) (2,659) (3,132) (3,530) (4,000) (4,000) (4,000) (4,000) (4,000) (4,000) (6,000) (1,500)

FCF 3,268 4,276 4,586 4,410 3,999 4,494 5,006 5,539 5,989 6,480 4,284 . . . 10,420 6.3%

Revenue Growth 6.0% Revenue Growth 2.0%EBITDA Margin 58.0% EBITDA Margin 56.0% PV of Cash Flows 65,650Depreciation Rate 14.0% Depreciation Rate 14.0% PV of Terminal Value 45,387Capex (4,000) Capex (1,500) Net Cash/(Net Debt) 4,710Working Capital 0 Working Capital 0Tax Rate 30.0% Tax Rate 30.0% Equity Value 115,748

Shares O/S (f.d. mn) 2,000

Equity Value per Share 57.87Cost of Equity Growth 1.0% (Discount)/Premium to Market 44.7%

LT Equity Weight 60% WACC-g 6.6%Risk Free Rate 4% Terminal Value 160,004Equity Risk Premium 9% Implied EBITDA Multiple 9.7xBeta 0.75Cost of Equity 10%

Cost of DebtLT Debt Weight 40%Cost of Debt 6%Tax Rate 30%After-tax Cost of Debt 4%

Weighted Average Cost of Capital (WACC) 7.6%

12mos Forward DCF

Stage 1 Steady State

Weighted Average Cost of Capital Terminal Value

Forecast



08 September 2011


Asia Pacific / ThailandRadio & TV Broadcasting

MCOT Public Company Limited (MCOT.BK / MCOT TB)

Pioneering the digital movement ■ Ambitious long-term plans. MCOT plans to become the leading multi-

platform provider for digital delivery. While we believe this is where the industry is headed, the long-term ambitions could be clouded by near-term earnings, dividend and capex susceptibility to new regulation and heavy infrastructure investment. We are initiating coverage of MCOT with a NEUTRAL rating.

■ Higher threat from multichannel. MCOT does not have the format or content to both prevent encroachment from cable & satellite or to capitalise on multichannel revolution for new growth. The �Edutainment� format has proven to be a good differentiator and attracts audiences; however, it is at risk to new licenses from the NBTC for FTA channels. MCOT�s prime time line-up carries the highest risk, and we do not see the same rate potential as its peers.

■ Ironically, the license owner could be more exposed. After waiting for 14+ years, broadcasting will have a powerful regulator to oversee a new framework. We believe this is more of a catalyst for MCOT than for BEC. The near-term impact of this could potentially by more negative for MCOT as a license owner because the NBTC will look to initially re-allocate both radio and TV frequency licenses, of which MCOT owns 62 and 2, respectively. While we do not expect the impact of the new Broadcasting Master Plan to become evident until 2013, it could entail new license fees and frequency auction costs from the very early stages. About 17% of MCOT�s revenue comes from radio, and radio licensing and operations is an immediate priority term for restructuring by the NBTC.

■ Fairly valued. We believe MCOT stock is fairly valued, but a slowing dividend growth trend and deteriorating ROIC are likely to pressure multiples in the next 12 months. A low interest rate environment supports current yield, but ambitious capital usage plans over the next couple of years and potential near-term impact from the NBTC do put the dividend at risk.

Share price performance

2025303540

Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-118090100110120

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the THAILAND SET IDX which closed at 1067.73 on 06/09/11 On 06/09/11 the spot exchange rate was Bt29.96/US$1

Performance Over 1M 3M 12M Absolute (%) � 2.6 7.2 Relative (%) 1.0 -2.4 -8.4

Financial and valuation metrics

Year 12/10A 12/11E 12/12E 12/13ERevenue (Bt mn) 5,546.1 6,541.2 6,620.8 7,036.3EBITDA (Bt mn) 2,472.5 3,165.5 2,946.6 3,010.6EBIT (Bt mn) 1,974.9 2,635.1 2,344.5 2,292.1Net income (Bt mn) 1,422.7 1,869.1 1,670.3 1,620.9EPS (CS adj.) (Bt) 2.07 2.72 2.43 2.36Change from previous EPS (%) n.a. Consensus EPS (Bt) n.a. 2.51 2.54 2.64EPS growth (%) 2.4 31.4 -10.6 -3.0P/E (x) 14.4 10.9 12.2 12.6Dividend yield (%) 6.2 8.2 7.4 7.1EV/EBITDA (x) 6.7 5.3 5.8 6.0P/B (x) 2.7 2.6 2.5 2.5ROE (%) 18.9 24.2 21.0 19.8Net debt/equity (%) net cash net cash net cash net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates.

*Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months.

Research Analysts Karim P. Salamatian, CFA


Rating NEUTRAL* Price (06 Sep 11, Bt) 29.75 Target price (Bt) 33.00¹ Chg to TP (%) 10.9 Market cap. (Bt mn) 20,441 Enterprise value (Bt mn) 16,679 Number of shares (mn) 687.10 Free float (%) 34.0 52-week price range 32.3 - 26.8

08 September 2011


Financial summary Figure 54: MCOT financial forecasts Key Operating MetricsY/E Dec, Bt mn FY09A FY10A FY11E FY12E FY13E FY14EYoY ADEX growth 0.1% 11.0% 10.3% 11.0%YoY TV ADEX growth 3.5% 14.7% 10.0% 12.8%Blended TV ad. Rate (Bt/min) 69,864 83,316 88,370 93,673 97,889 101,318EBITDA margin 47.3% 44.6% 48.4% 44.5% 42.8% 41.7%EBIT margin 37.7% 35.6% 40.3% 35.4% 32.6% 29.8%Net ROIC 16.8% 16.8% 21.6% 18.7% 17.7% 16.2%DPS (Bt) 1.80 1.86 2.45 2.19 2.12 1.98P&LY/E Dec, Bt mn FY09A FY10E FY11E FY12E FY13E FY14ERevenue 4,797 5,546 6,541 6,621 7,036 7,164OPEX (2,529) (3,074) (3,376) (3,674) (4,026) (4,175)EBITDA 2,267 2,472 3,165 2,947 3,011 2,989Dep. & Amort. (458) (498) (530) (602) (719) (855)EBIT 1,810 1,975 2,635 2,345 2,292 2,134Other inc./exp. 16 41 0 0 0 0Financial income 52 52 57 59 61 64Profit before tax 1,878 2,068 2,692 2,404 2,354 2,198Taxes (484) (622) (793) (706) (706) (659)Minorities (4) (23) (31) (27) (27) (25)Net income 1,389 1,423 1,869 1,670 1,621 1,514Reported EPS (Bt) 2.02 2.07 2.72 2.43 2.36 2.20 Adjusted EPS (Bt) 1.82 2.07 2.31 2.43 2.36 2.20 Balance SheetY/E Dec, Bt mn FY09A FY10E FY11E FY12E FY11E FY12ENet fixed assets 4,272 4,307 4,536 4,949 6,206 7,138 Intangible assets 88 103 150 196 239 280 Other non-current assets 97 97 97 97 97 97 Cash & cash equiv. 3,646 3,871 3,762 3,487 2,313 1,509Other current assets 1,589 2,011 2,125 2,206 2,340 2,416Total assets 9,693 10,389 10,671 10,935 11,195 11,440ST Debt - - - - - - Other current liabilities 1,165 1,760 1,694 1,700 1,709 1,714LT Debt - - - - - - Other LT liabilitites 1,037 965 965 965 965 965 Total liabilities 2,202 2,725 2,659 2,665 2,674 2,679Minority interest 34 56 155 182 209 234Shareholders' equity 7,457 7,608 7,858 8,088 8,313 8,528Total liabilities and equity 9,693 10,389 10,671 10,936 11,196 11,440CashflowY/E Dec, Bt mn FY09A FY10E FY11E FY12E FY11E FY12EEBITDA 2,267 2,472 3,165 2,947 3,011 2,989 Working capital (54) (39) (40) (7) (61) (16) Capex (441) (584) (817) (1,065) (2,021) (1,819) Disposal / Retirement - 38 - - - - Net investments (39) 147 - - - - Financing costs 51 47 57 59 61 64 Net dividend received/(paid) (1,101) (1,273) (1,682) (1,503) (1,459) (1,362) Taxation paid (418) (584) (793) (706) (706) (659) Cash flow before financing 265 225 (109) (275) (1,175) (804) Equity 1 - - - - - Free Cash Flow 265 225 (109) (275) (1,175) (804) Ending Net Cash/(Debt) 3,646 3,871 3,762 3,487 2,313 1,509


08 September 2011


Pioneering the digital movement Ambitious digital network plans MCOT has ambitious plans to develop a multi-platform model and be the primary network provider for digital content. While it is far too early to assess the probability of reaching such goals, there are several regulatory and execution risks that we must consider during the next 12-24 months. The company has a decent platform to build off with operations in FTA, satellite, cable, radio and an early-stage digital TV business, but converging these mediums with content is the true operational challenge.

While we believe the formation of the NBTC is an immediate to near-term positive for the broadcasting industry, because the industry may finally get a clear competitive framework with a powerful regulator after awaiting one for over 14 years. However, we believe MCOT�s TV, radio and medium-term profitability could be more affected that BEC�s. We factor in new licensing fees (TV and radio) to MCOT�s P&L in late 2012, whereas we do not do the same for BEC.

MCOT�s growth aspirations require significant capital. The same can be said for BEC, but building network infrastructure for digital delivery will require significantly more capital than developing (solely or jointly) content for new speciality channels as we expect at BEC.

As such, we forecast MCOT�s returns-on-capital to decline after 2012 as investments in property, network and new licensing opportunities will have a near-term deflationary impact. We also expect EPS to decline in 2012, 2013 and 2014 under the weight of the new investment and limited market share gains, and concurrently, there will be downside risk to the dividend.

Company overview MCOT, which is 66% owned by the Ministry of Finance, has a mission to become a multi-platform operator and the primary network provider for digital broadcasting in Thailand. The company looks to build Thailand�s national digital network by 2015. The company is already a multi-platform operator. However, the key issues going forward will be how it will converge these along with content to become an integrated analogue and digital network provider. MCOT�s operations and assets include:

■ Ownership of two FTA TV channel licenses � Channel 9 (Modernine TV) and Channel 3. MCOT operates Modernine TV, where at least 50% of its programming must be news, documentaries and/or education. The programme line-up can be classified as �edutainment�. Channel 3 is operated by BEC through a BTO concession agreement that expires in 2020;

■ Ownership of 62 radio frequency (60 FM and 2 AM) licences � BEC operates the programming and airtime of one radio frequency (105.5), and this concession agreement piggy-backs on the Channel 3 agreement;

■ Ownership of seven satellite channels � Two operated by MCOT and five operated by TrueVisions, owned by True Corp PCL (TRUE.BK, Bt4.00, UNDERPERFORM [V], TP Bt2.85) through a concession agreement that expires in 2014 for satellite broadcast and 2019 for cable broadcast;

■ K-band satellite rental � Recently, the company rented a k-band satellite transponder from Thaicom PCL (THCOM.BK, Bt10.80, OUTPERFORM [V], TP Bt8.80) for broadcast of up to ten channels in both standard and high definition (HD). The company is targeting to be the HD network provider for its own and third-party content;

Ambitious plans to develop multi-platform model and primary digital network. Execution risk could be high

MCOT�s radio and TV licenses present more near-term risk under NBTC

Heavy capital outlay needed in coming years to reach goals

ROIC trend is inferior to BEC and weighed down by higher costs and heavy capex

MCOT is 66% owned by the Ministry of Finance

Modernine TV is an �edutainment� format channel

TrueVisions concessions expire in 2014E and 2019E

New satellite agreement with Thaicom is a step in the digital direction

08 September 2011


■ Other media ownership � Owns Thai News Agency for news and documentary programming, an interactive TV operation and a recently-launched digital TV business with IEC Plc. that uses the existing frequencies owned by the company.

Television represents the largest component of revenue at 70% followed by concession agreements (BEC and TRUE) at 16% and radio at 15% based on our 2011E forecasts. We forecast advertising to represent 64% of total revenue in 2011E (Figure 55 and Figure 56).

With respect to operating profit, concession agreements carry the highest profitability given the low expense profile and represent a 27% share, followed by TV and radio at 65% and 8%, respectively.

Figure 55: MCOT 2011E revenue segments Figure 56: MCOT 2011E EBIT segments

Concession Agreements

22%

Radio14%

Television64%

2011E Revenue = Bt6.5 bn

Television65%

Radio8%

Concession Agreements

27%

2011E EBIT = Bt2.6 bn

Source: Credit Suisse estimates Source: Credit Suisse estimates

We estimate that ~30% of MCOT�s advertising revenue comes directly and indirectly from government sources.

Edutainment more stable � We believe Modernine TV�s news and news talk programmes (both own productions and jointly produced with the Nation Group) are competitive with other channels. However, on the entertainment side, Modernine TV�s focus on edutainment rather than entertainment and Lakorn (soap operas) leads to more stable viewership trends, but with lower profitability. In addition, this may cause higher susceptibility to a new channel that may be launched with a heavier news/ edutainment programme mandate.

Modernine TV�s lack of entertainment programming, especially during the prime time, has prevented the viewership gap relative to Channel 3 from narrowing (Figure 57). There have been periods where it appeared that the edutainment strategy was gaining, such as in 2008, but over the past year, Channel 3�s strong line-up in prime time has gained back viewers. We do not expect the gap to narrow, and believe the risk is one of its widening as Channel 3 viewership, especially in the primetime slots, is benefitting from BEC�s high investment in content (Figure 58). BEC invests 10x more than MCOT in content.

Building news content provider for Thailand and ASEAN

Advertising sales is 64% of revenue in 2011E

Edutainment is stable, but does not get the ad rates of prime time

MCOT has not been able to narrow viewership gaps to Channel 7 and Channel 3

BEC invests 10x more in content

08 September 2011


Figure 57: All-day share gap not closing Figure 58: Primetime gap at risk without Lakorns (soaps) Primetime is 20:15 to 22:00

8%

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Q1/07 Q3/07 2007 Q2/08 Q4/08 Q1/09 Q3/09 2009 Q2/10 Q4/10 Q1/110%

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Modernine TV All-day Viewership Share (lhs)Share Gap to Channel 3 (rhs)

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Q1/07 Q3/07 2007 Q2/08 Q4/08 Q1/09 Q3/09 2009 Q2/10 Q4/10 Q1/110%

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Modernine TV Primetime Viewership Share (lhs)Share Gap to Channel 3 (rhs)


From a TV ADEX share perspective, Modernine TV is punching above its weight-class with a share 2x higher than its viewership shares. There are a couple of reasons for this. First, 30% of advertising is from government agencies, which is less sensitive to viewership data given the ownership of MCOT. Second, when ITV�s commercial license was terminated in 2008, advertisers switched more TV ADEX to MCOT relative to Channel 3 and Channel 7 because it is important to support a number three player to ensure advertising pricing remains disciplined. Too much concentration (albeit Channel 3 and Channel 7 control 60% of TV ADEX) would be unfavourable for the advertisers.

Again, similar to viewership, we believe that Modernine TV�s TV ADEX share is more susceptible than Channel 3 or Channel 7 to a new FTA channel license because of its lower primetime viewership share, smaller investment in content and limitations on entertainment-based programming. The relative share gap has narrowed in the past four quarters (Figure 59).

Figure 59: TV ADEX share has narrowed for Modernine TV

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2003 2005 Q1/07 Q3/07 2007 Q2/08 Q4/08 Q1/09 Q3/09 2009 Q2/10 Q4/10 Q1/110%

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Modernine TV Ad Share (lhs) Modernine TV Viewership Share (lhs)Ad Share Gap vs. Channel 3 (rhs)

TV ADEX share gap has closed since ITV suspended


High TV ADEX share relative to viewership share is partially due to disproportionately high ADEX from government

ADEX share is more at risk to new channels because MCOT lacks strong entertainment content

08 September 2011


� but less profitable MCOT�s EBITDA margins, operating margins and ROIC are all substantially lower than those of BEC (Figure 60). Going forward, we expect an upward trajectory in margins and ROIC for BEC versus weakening profitability at MCOT (Figure 61). This is primarily due to our view that a new regulatory framework will have greater near term negative impact (radio frequency re-allocation and licensing fees on both TV and radio) on MCOT�s margins, plus the higher risk in Modernine TV�s viewership and TV ADEX shares.

Figure 60: BEC has higher and more stable margins % of revenue

Figure 61: ROIC expansion is more likely at BEC

0%

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70%

04 05 06 07 08 09 10 11E 12E 13E 14E

MCOT EBITDA MCOT EBITBEC EBITDA BEC EBIT

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70%

04 05 06 07 08 09 10 11E 12E 13E 14E

MCOT ROIC BEC ROIC

Investment in new channels/content and lower Ad revenue growth

Source: Company date, Credit Suisse estimates Source: Company data, Credit Suisse estimates

MCOT is less profitable than BEC for a number of reasons, but mainly: (1) revenue mix has more radio contribution, (2) 30% lower advertising rates due to edutainment strategy and weaker primetime ratings, (3) purchase 20-25% of content versus 10% at BEC and (4) less efficient operations with higher staff and fixed cost overhead.

Management has embarked on a cost-cutting strategy whereby it expects to reach BEC�s level of margins by the end of 2011. We are not as optimistic on this as our 2012 EBIT margin gap is more than 1,000 bp in favour of BEC. Through early retirement and reducing the number of salespeople in both TV and radio advertising, the company could save Bt150-200 mn or increase margins by 300 bp. Lastly, a new ERP implementation in 2012 could lead to lower costs over the long term, but anecdotally, we believe this is likely to be a source of negative cost surprises.

BEC�s content model is more profitable

As we mentioned earlier, 90% of BEC�s local content is sourced in-house or through exclusive partnerships. In-house content production is expensive and risky; however, BEC mitigates the risk through equity investments with �out-of-house� production companies whereby BEC�s capital cost and exposure is lowered. The key is that BEC can exert significant operational and creative power because of its size and financial resources.

Comparatively, MCOT invests only ~Bt100 mn per year on content and the company has weaker partnership agreements. Because of BEC�s scale, entertainment focus and the viewership of Channel 3, it can attract more talented artists than MCOT.

Despite recent cost cutting efforts, MCOT margins are lower than BEC and expected to fall faster

BEC is a more efficient operator with higher ad rates

BEC�s content model is more profitable and allows for more creative control

08 September 2011


Possible license fees and concession fee expiration impact Establishment of the NBTC and MCOT�s relatively medium term concession agreement expiration could have negative impacts on earnings and sentiment within the next 24 months.

(1) As part of the Frequency Allocation and Broadcasting Master Plan, MCOT may have to apply for licences, which should not jeopardise its ownership of the licenses, but could trigger licensing fees. The NBTC Act of 2010 states that license fees would not exceed 2% of income before expenses. However, there could be additional profit risk from a Universal Service Obligation (USO) fee of 2% of its non-concession related revenue (85% of total revenue). In our model, we include 2% licensing fee on radio and TV revenue commencing from 2013E.

(2) Clause 76 of the Radio and Broadcasting Act 2008 requires the Ministry of Finance (own 66% of MCOT) to collect 2% of income from government agencies, state enterprises or other government authorities that have granted permission, concession or agreement for operations of broadcasting businesses. In our model we include 2% MoF fee on concession revenues commencing from 2013.

(3) One of MCOT�s key revenue and profitability driver has been the concession revenue share from BEC and TrueVisions, which we expect to account for 16% of total revenue and 27% of total EBIT, respectively, for 2011. The concession agreement for digital satellite operation with TrueVisions expires in September 2014. We expect this will result in the loss of Bt465 mn in EBIT or 22% of our 2014E EBIT forecast.

These three items combined could have a negative impact on EBIT, PBT and EPS of Bt602 mn, Bt 421 mn and Bt0.61, respectively, in 2015 (Figure 62).

Figure 62: MCOT will have to find profitability offsets before the end of 2014 EBITDA & EBIT in Bt mn

2,2672,472

2,947 3,011 2,989

2,540

1,8101,975

2,6352,345 2,292

2,134

1,584

3,165

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2009 2010 2011E 2012E 2013E 2014E 2015E30%

32%

34%

36%

38%

40%

42%

44%

46%

48%

50%

EBITDA (lhs) EBIT (lhs) EBITDA Margin (rhs)

Loss of Bt465 mn in TrueVisions concession revenues and higher licensing fees


Real estate project poses increased near term risks MCOT has recently announced plans to develop a 52 rai (8.3 hectares) site it already owns adjacent to its head office for a mix-use conference, office and regional broadcasting hub. The investment plan with investment of Bt10 bn (excluding land cost) is being submitted to the newly created Cabinet. Construction is expected to start in 2H12.

NBTC is likely to impose new licensing fees for broadcasting frequencies

Will need the NBTC for clarity, but could be an additional 2% payment to MoF

Higher licensing fees and loss of TrueVisions satellite concession will lead to an after-tax loss of Bt602 mn in EBIT in 2015

Large real estate project could be a drain on capital and management focus

08 September 2011


We do not expect to receive details on the investment plan until the end of the year; therefore, our forecasts do not include its potential impact.

We believe the project is too capital intensive and would be highly distracting for management to undertake on its own. Therefore, we expect the company to announce a joint-venture partner(s) relatively soon. We would ideally like to see the company partner with an experienced developer whereby capital costs are shared and the developer bears more execution risk.

This project could have positive long-term benefits, but in the near-to-medium term, the increased financial, operating and dividend risk increase. We forecast a net cash position of Bt3.9 bn at the end of 2011. A material portion of this could potentially be deployed behind the real estate project, which would impact the company�s ability to invest in other growth opportunities under the NBTC�s new Broadcasting Master Plan.

Valuation � Bt33 12-month target price We value MCOT shares on the same three methodologies as BEC. The three approaches are (target value from each approach in parentheses):

(4) Dividend yield relative to ten-year Government of Thailand bonds (Bt31/share);

(5) Enterprise value to return-on-invested capital (Bt38/share); and

(6) Discounted cash flow (Bt30/share).

Our Bt52 12-month target price is determined as the simple average of the three approaches.

Relative yield should trend higher on slower dividend growth

We believe the most appropriate way to value MCOT shares is on a dividend yield basis relative to the ten-year Thailand government bond yields because if we view the past six years� data, BEC has paid-out 80% of its earnings as dividends, and we expect the payout ratio to remain constant at 90% going forward. By virtue of the large payout ratio, we do not believe relative price-to-book is an adequate measure to value MCOT shares.

As the payout ratio has increased, annual dividend growth has been 21% since 2004 versus 6.5% for EPS. Clearly, this growth dichotomy cannot persist, so we forecast a much more moderate 2% annual dividend growth over the next four years.

Over the past six years, the relative yield has averaged 1.90x, which slightly above the current level of 1.79x. Since 2008, the relative yield has widened considerably to 3.13x due to the global slowdown (in times of recession advertising budgets are often cut first and heaviest) and growing concerns over the regulatory environment. As we can see from Figure 63, the current relative yield below long term trend line. We believe benign 2% annual dividend growth until 2014, nearer term potential negative impacts of NBTC and higher capital expenditure requirements into real estate and network infrastructure, all put the dividend at a greater risk than what we see at BEC.

MCOT will find a partner to help carry the weight of the Bt10 bn investment

Real estate investment could put dividends at risk

We forecast 2% annual dividend growth going forward

MCOT trades at a relative yield premium to the long-term average

08 September 2011


Figure 63: Trading at a premium relative to bond yields � expect yield to migrate upwards closer to long-term trend

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Average Line = 1.90x

Source: Factset, Bloomberg

The low interest rate environment will be positive for MCOT both from an ADEX (operational) perspective and to support current yield. That said, the near-to-medium term risks we see that could negatively impact the dividend yield lead us to believe the relative yield should widen to 2x. On the basis of our 2012E forecast dividend of Bt2.18/share and ten-year bond yields of 3.5%, this implies a value for MCOT of Bt31 per share. This also puts our target dividend yield in line with the smaller broadcasting peers globally.

MCOT�s ROIC argument is harder to make and less convincing

Similar to BEC, MCOT�s valuation is highly sensitive to returns-on-invested capital (Figure 64). Over the past six years, ROIC improvements have been met with EV/IC multiple expansion. As we do with BEC, we believe this phenomenon is likely to continue.

However, for MCOT, we expect ROIC to commence rolling over in 2012 and declining to 16% in 2014 versus 22% in 2011. This is largely due to weaker earnings and much higher capex spending in real estate and network infrastructure roll-out. So far, MCOT has been able to follow a low capital intensive strategy for rolling out a larger network, such as its recent agreement with Thaicom. However, if the company wants to truly lead in the digital platform, it will require considerable investment in 2013 after the NBTC Broadcasting Master Plan is announced.

We base our EV/IC valuation for MCOT the same way as we do for BEC. However, with a deteriorating ROIC profile, we apply a 30% discount to reflect this trend. We believe MCOT�s ROIC is more susceptible to that of BEC.

Relative to the global broadcasting universe (Figure 65), we believe MCOT shares are worth Bt38 (2.5x 2012E IC of Bt9 bn plus net cash of Bt3.5 bn)/687 mn shares O/S] on the back of our 18.7% 2012E net ROIC forecast.

Low rate environment is positive, but dividend risk should push yield higher

We expect MCOT�s ROIC to deteriorate starting in 2012, which will pressure multiples

08 September 2011


Figure 64: EV/IC multiples have expanded along with ROIC

Figure 65: As the gap widens, so too should the multiple EV/IC vs. ROIC last 12 months

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Fuji

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M6-Metro.

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TV AztecaTVN SA

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DCF fully-loaded for investment yields upside of only 2%

In our DCF model, we assume heavy increases in capex in 2013E and 2014E after the NBTC Master Plan is expected to be laid out, followed by six consecutive years of heavy investment prior to the concession agreements for Channel 3 and TrueVisions cable expire on 31December 2009 and 25 March 2020, respectively.

We expect the new investment to be behind license auctions, analogue and digital network infrastructure and cable and satellite channels.

Our lower long-term margin assumptions reflect new fees for existing and new frequency licenses.

We also assume that through our DCF period, the revenue and EBITDA growth moderate to 2% and 1%, respectively, versus the company�s six-year historical CAGR of 11% for both.

Our DCF model can be found in Figure 66.

DCF reflects new auction and licensing risk, but not the real estate project that will have near-term impact

08 September 2011


45

Figure 66: MCOT DCF valuation

(mn Bt) 2011-20302011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 . . . 2030 CAGR

Revenue 6,541 6,621 7,036 7,164 7,450 7,748 8,058 8,381 8,716 9,064 9,155 10,013 2.3%EBITDA 3,165 2,947 3,011 2,989 3,129 3,254 3,384 3,520 3,661 3,807 3,662 4,005 1.2%EBITDA Margin 48.4% 44.5% 42.8% 41.7% 42.0% 42.0% 42.0% 42.0% 42.0% 42.0% 40.0% 40.0%EBIT 2,635 2,345 2,292 2,134 577 640 716 805 1,116 1,408 1,389 2,306 -0.7%EBIT Margin 40.3% 35.4% 32.6% 29.8% 7.7% 8.3% 8.9% 9.6% 12.8% 15.5% 15.2% 23.0%

Less: Adjusted Taxes (776) (689) (688) (640) (173) (192) (215) (241) (335) (423) (417) (692)

NOPLAT 1,859 1,656 1,604 1,494 404 448 501 563 781 986 972 . . . 1,614 -0.7%

Working Capital (40) (7) (61) (16) 0 0 0 0 0 0 0 0Depreciation 602 719 855 957 2,552 2,615 2,669 2,715 2,545 2,399 2,273 1,699Capex (817) (1,065) (2,021) (1,819) (3,000) (3,000) (3,000) (3,000) (3,000) (3,000) (1,500) (1,500)

FCF 1,604 1,303 378 616 -44 62 170 278 326 385 1,745 . . . 1,813 0.6%

Revenue Growth 4.0% Revenue Growth 1.0%EBITDA Margin 42.0% EBITDA Margin 40.0% PV of Cash Flows 9,428Depreciation Rate 14.0% Depreciation Rate 14.0% PV of Terminal Value 7,898Capex (3,000) Capex (1,500) Net Cash/(Net Debt) 3,487Working Capital 0 Working Capital 0Tax Rate 30.0% Tax Rate 30.0% Equity Value 20,813

Shares O/S (f.d. mn) 687

Equity Value per Share 30.30Cost of Equity Growth 1.0% (Discount)/Premium to Market 1.8%

LT Equity Weight 60% WACC-g 6.6%Risk Free Rate 4% Terminal Value 27,843Equity Risk Premium 9% Implied EBITDA Multiple 6.9xBeta 0.75Cost of Equity 10%

Cost of DebtLT Debt Weight 40%Cost of Debt 6%Tax Rate 30%After-tax Cost of Debt 4%

Weighted Average Cost of Capital (WACC) 7.6%

12mos Forward DCF


Weighted Average Cost of Capital Terminal Value

Forecast



08 September 2011


Companies Mentioned (Price as of 06 Sep 11) Antena 3 (A3TV.MC, Eu4.60, NEUTRAL [V], TP Eu7.40) BEC World (BEC.BK, Bt40.00, OUTPERFORM, TP Bt52) CTC Media (CTCM.OQ, $14.63, UNDERPERFORM [V], TP $15.00) Cyfrowy Polsat S.A (CPSM.WA, PLN14.35, NEUTRAL, TP PLN16.00) DISH TV (DSTV.BO, Rs78.60) FUJI Media Holdings (4676.T, ¥112100) Global Mediacom Tbk (BMTR.JK, Rp790.00) GMM Grammy Public Co. (GRAM.BK, Bt18.90) ITV (ITV.L, 55 p, OUTPERFORM, TP 100.00 p) KT Skylife (053210.KS, W25,550, OUTPERFORM [V], TP W34,400) M6 Metropole Television (MMTP.PA, Eu14.57) MCOT Public Company Limited (MCOT.BK, Bt29.75, NEUTRAL, TP Bt33) Media Nusantara Citra PT (MNCN.JK, Rp980.00) Mediaset (MS.MI, Eu2.42, UNDERPERFORM, TP Eu3.60) Mediaset Espana Comunicacion (TL5.MC, Eu4.56, NEUTRAL [V], TP Eu8.60) Modern Times Group (MTGb.ST, SKr300.50) Nippon TV (9404.T, ¥11110) Phoenix Satellite Television (2008.HK, HK$2.04) Prime Media Group (PRT.AX, A$0.74, OUTPERFORM, TP A$0.80) Procter & Gamble Co. (PG, $62.55, OUTPERFORM, TP $70.00) ProSiebenSat.1 (PSMG_p.DE, Eu12.20, OUTPERFORM [V], TP Eu25.00) PT Surya Citra Media (SCMA.JK, Rp5,800.00) Sky Network Television (SKT.NZ, NZ$5.86) Sun TV (SUTV.BO, Rs302.95) Ten Network Holdings (TEN.AX, A$0.90, OUTPERFORM, TP A$1.34) TF1 (TFFP.PA, Eu10.18, UNDERPERFORM, TP Eu11.00) True Corp PCL (TRUE.BK, Bt3.96, UNDERPERFORM [V], TP Bt2.85) TV Asahi (9409.T, ¥117500) TV Azteca CPO (AZTECACPO.MX, peso7.36) TVN S.A. (TVNN.WA, PLN13.09, OUTPERFORM, TP PLN23.50) Unilever NV (UNc.AS, Eu22.97, UNDERPERFORM, TP Eu21.50) Zon Multimedia Services (ZON.LS, Eu2.61, OUTPERFORM, TP Eu4.50)

Disclosure Appendix Important Global Disclosures I, Karim P. Salamatian, CFA, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for BEC.BK BEC.BK Closing

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08 September 2011


3-Year Price, Target Price and Rating Change History Chart for MCOT.BK MCOT.BK Closing

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The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts� stock ratings are defined as follows: Outperform (O): The stock�s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock�s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock�s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock�s absolute total return potential to its current share price and (2) the relative attractiveness of a stock�s total return potential within an analyst�s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock�s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock�s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

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Credit Suisse�s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

08 September 2011


Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names. Price Target: (12 months) for (BEC.BK) Method: Our target price of Bt52 for BEC World is the average calculated by using three methods; (1) dividend yield relative to 10-year Thailand government bonds, (2) EV (enterprise value) /IC (invested capital) vs ROIC (return on invested capital), and (3) discounted cash flow valuation, using a discount rate of 7.6% (a risk-free rate of 3.5%, a risk premium of 8.75% and a beta of 0.75) and a terminal growth rate of 1%. Risks: Potential risks to our Bt52 target price for BEC World are: 1) A weaker-than-expected Thai economy could result in lower-than-expected advertising spending and earnings. 2) Higher-than-expected operating costs may result in lower earnings. 3) NBTC Broadcasting Master Plan that could lead to higher licensing/operating expenses, reallocation of broadcasting frequencies and more commercial competition from cable & satellie TV channels Price Target: (12 months) for (MCOT.BK) Method: Our target price of Bt33 for MCOTd is the average calculated by three methods: (1) dividend yield relative to 10-year Thailand government bonds, (2) EV (enterprise value)/IC (invested capital) vs ROIC (return on invested capital), and (3) discounted cash flow valuation, using a discount rate of 7.1% (a risk-free rate of 3.5%, a risk premium of 8.75% and a beta of 0.65) and a terminal growth rate of 1%. Risks: Potential risks to our Bt32 target price for MCOT are: 1) A weaker-than-expected Thai economy could result in lower-than-expected advertising spending and earnings. 2) Higher-than-expected operating costs may result in lower earnings. 3) NBTC Broadcasting Master Plan that could lead to higher licensing/operating expenses, reallocation of broadcasting (radio & TV) frequencies and more commercial competition from cable & satellie TV channels Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections.

Important Regional Disclosures Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (BEC.BK, MCOT.BK) within the past 12 months. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. Credit Suisse Securities (Europe) Limited acts as broker to ITV.L. The following disclosed European company/ies have estimates that comply with IFRS: A3TV.MC, ITV.L, MS.MI, TL5.MC, PSMG_p.DE, TFFP.PA, UNc.AS. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that. For Thai listed companies mentioned in this report, the independent 2008 Corporate Governance Report survey results published by the Thai Institute of Directors Association are being disclosed pursuant to the policy of the Office of the Securities and Exchange Commission: BEC World(Very Good), GMM Grammy Public Co.(Very Good), MCOT Public Company Limited(Good), True Corp PCL(N/A). Taiwanese Disclosures: Reports written by Taiwan-based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. � Karim P. Salamatian, CFA, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (Thailand) Limited. For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683. Disclaimers continue on next page.

08 September 2011Asia Pacific / Thailand

Equity Research

MD0192

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(transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instrument Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Securities Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited , Credit Suisse Securities (Thailand) Limited, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House,Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn. Bhd., to whom they should direct any queries on +603 2723 2020. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this report was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the FSA or in respect of which the protections of the FSA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. Any Nielsen Media Research material contained in this report represents Nielsen Media Research's estimates and does not represent facts. NMR has neither reviewed nor approved this report and/or any of the statements made herein. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Copyright 2011 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

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