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Haris Suhendra

Managing and Sustaining Profitable Growth Analysis for

In 2011/2012

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Table of Contents

• Overview • Analysis on External Environment • Industry Granularity Analysis• Analysis on target VIVA’s internal environment• Conclusion & Recommendation

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Overview

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Scope of work

• To look at the development of media industry in Indonesia, trends, future growth rates, and market structures at much greater depth than the aggregate industry level. In this paper,

• The author will be focus on VIVA as a player in the media industry. • There was also discussion about the VIVA’s competitors. • The author analyses using data from 2007-2011.• Methodology

– In collecting the data, the authors use various sources of information such as informants through interviews, library, internet, media such as magazines, newspapers, TV and various other sources such as journals and publications.

– For the analysis of the problem and solution recommendations, the authors use a variety of theoretical approaches such as PESTEL Analysis, "Porter's Five Force Analysis" to analyze the industry. In this paper, the authors using the Granularity of Growth theory to analyze distinguish between corporate targets of achieving profitability & growth, Examine underlying drivers on profitable growth, Analyses granularity factors in target company, Examine growth factors in a company or industry.

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Journey of VIVA’s Life

• PT Visi Media Asia Tbk (Viva or Company) is Indonesia’s leading convergent media company, having its core competency in providing quality content in the areas of news, sports and lifestyle across its diversified operating companies with multiple platforms including free-to-air (“FTA”) television stations, internet and mobile phones.

• 2011 was indeed a landmark year for Viva as the listing of its shares in the Indonesian Stock Exchanges (BEI) which resulted in IPO proceeds of gross Rp. 500,175,000,000 [Five Hundred Billion One Hundred Seventy Five Million].

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Journey of VIVA’s Life (2)

impressive improvement in financial performance in-line with the ever so fast growing of the Indonesian economy.

Source : VIVA’s Annual Report 2011

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Analysis on external environment

Macro-environment

The power to control the media, seems to have become the power to also control policy and media law, hence confirming the regulation is more oriented towards group interests rather than public interests.

Indonesia's economic growth is expected to continue to grow by 6-7% per year in the 5 (five) years.

social networking/ social media has opened the space without limits for people to communicate.

Natural conditions are mutually separated island nation caused the construction of physical infrastructure costs are expensive. On the other hand, the remaining telecommunications wastes may result in environmental pollution on soil pollution include ecology, water and air.

Development of Media Digitization has given new challenges

One of the regulations that have changed the face of media in Indonesia is the UU No. 32/2002 which brought a wave of new freedoms and democratic spirit of the media.

There is gap in access to conventional media such as television, are still hard to come by people living in remote and underdeveloped areas.

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Porter's Five Forces in National Media Industry in 2011/2012

Threat of entry is LOW

the bargaining power of supplier is LOW

The bargaining power of buyer in the industry

is High

The threat of substitute product in the industry

is medium

The intensity of competition is high

This is partly due to the severity of the barriers to entry that must be taken such as capital requirements, economies of scale, and government regulations regarding the conduct of a network television station broadcasting system which will be implemented in the near future.

in-house production, one of strategy to reduce the cost of production. The other advantage players can design budget TV coverage more planned and controlled.

The development of Mobile technology Development of the film & tourism industry

This is because a lot of media agency holding the funds accumulated large amounts of ad spending. The bargaining power of a multinational media specialist is very big because they have a fund huge ad spending.

Major media groups in control of almost all media channels in Indonesia, including

broadcast, print and online media. They are MNC Group, Kompas Gramedia, EMTEK

Group, VISI Media Asia, Jawa Pos group, Mahaka Media, CT Group, BeritaSatu

Media Holdings, the Media Group, MRA Media, Femina Group and the Tempo of

the core Media.

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Industry Granularity AnalysisKey industry playersIndustry/product/market growth trends and DevelopmentsProfitable growth strategic movements analysis: Strategies of key industry players

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Key Industry Players TV Players

Market Share

Main Content Group

RCTI 17% Sinetron, Coomedy

MNC Group

SCTV 16% Sinetron, Drama

EMTEK Group

Trans TV 14% Variety Show, sinetron, Commedy

CT Group

MNC TV 12% Religion Drama, Local Music

MNC Group

Trans 7 10% Sport, reality show, News

CT Group

Indosiar Visual Mandiri

10% Sinetron, Drama, Reality Show

EMTEK Group

Global TV

8% Nickeledeon, F-1 Racing, MTV

MNC Group

ANTV 7% Lifestyle, family entertainment, sport

Visi Media Asia

TV One 5% News, Sport Visi Media Asia

Metro TV 3% News, Sport, Documenter

Media Group

Market Share FTA (Free-to-Air in Indonesia : 2011).

Market Share FTA (Free-to-Air in Indonesia : 2012.

Source : MPA analysis (2011)

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Industry trends and developments.

The Prospect of a FTA’s TV advertisement• MPA showed that in 2011, Indonesia again have net income growth of television media ads reached $

1.2 billion, grew by 18.6% as compared to last year. • Further, the average growth rate per year (CAGR) net income of these ads will grow 4.4% up to 2016,

reaching US $ 2.5 billion, equivalent with 44.0% market share. • In 2011, the amount of net advertising media expenditure allocated on television are of 42.7%. • The dominance of the television because of the popularity of television broadcast networks do not pay

that has a market share of 42.1% of total net advertising market. • Free-to-air (“FTA”) television reach more or less 35 million families or 56% of families in Indonesia and is

forecast to rise by 60% by 2016.

The prospects of ONLINE advertising• The prospects of ONLINE advertising spending Increase in net advertising through online media in 2011

reach 75,1% or US $ 52 million compared to the previous year in the same period amounted to US $ 30 million.

• MPA predicts that net income CAGR through online media advertising will grow to 31.6% to reach US$ 212 687 million, equivalent to 5.8% market share.

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Profitable growth strategic movements analysis: Strategies of key industry players

New focus: Strategy • increase the share of viewers and advertising expenditures and to improve the quantity and quality of content over

production in-house.• Developed a network of local television• Optimize content libraries by selling licenses for each program and channel• Enlarging circulation and advertising revenues from print media, especially newspapers Around Indonesia. • Develop and manage well the portal on-line news and entertainment www.okezone.com• Optimize revenues and manage expenses to ensure adequate profit and margin.• Continue to creating synergy inter-unit business.

Media Nusantara Citra (MNC) Group As the number one television network in Indonesia. In 2011, advertising revenue increased by 20%.EBITDA margin grew from 30% in 2010 to 33% in 2011.

CEO Plan :Concurrent to enhancing revenues, MNC implemented a range of activities to improve operational synergy across all business units

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Profitable growth strategic movements analysis: Strategies of key industry players (2)

CEO Plan: • Focus on cost control strategy that carefully and increased cash flow. As well as positions with conservative balance

sheets, this will help us to seize opportunities in the future. New Focus : • The first is the success we acquired a controlling stake in Indosiar, and digital pay-TV service in our company, namely

NexMedia.• Focus on cost control strategy that carefully and increased cash flow. As well as positions with conservative balance

sheets, this will help us to seize opportunities in the future.

EMTEK Group • Three main business areas: media, solutions and connectivity. • In 2011, the Group's media business and solidifying Emtek connectivity with the takeover of 84,77% share of the national television transmitter station, Indosiar, as well as the launch of the digital pay-TV service, which covers the metropolitan area NexMedia • Revenue of Rp. 3,466 .5 billion, increased by 23.3% of the revenue of Rp 2864.5 billion for the year ended December 31, 2010. • The Media Division contributed 66,9% in 2011, which increased by 58,9% from the previous year.

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Profitable growth strategic movements analysis: Strategies of key industry players (3)

Figure 2 : Financial performance MNC, EMTEK and VIVA Group (2008-20011)

Source : Bloomberg Finance

Currency in 31-Dec 31-Dec 31-Dec 31-Dec Millions of Indonesian Rupiahs 2008 2009 2010 2011

IDR IDR Reclassified

IDR

VIVA MNC EMTEK VIVA MNC EMTEK VIVA MNC EMTEK VIVA MNC EMTEKRevenues 421,065.00 3,921,940.00 3,123,122.30 668,356.20 3,862,572.00 2,828,636.00 889,101.10 4,436,365.00 3,353,538.30 992,634.80 5,047,714.00 4,136,532.90

Other Revenues -- 61,273.00 419,542.00 342,760.00TOTAL REVENUES 421,065.00 3,921,940.00 3,123,122.30 668,356.20 3,923,845.00 2,828,636.00 889,101.10 4,855,907.00 3,353,538.30 992,634.80 5,390,474.00 4,136,532.90

Cost of Goods Sold 370,283.40 2,268,641.00 2,081,030.00 356,473.30 2,224,875.00 1,806,817.80 376,670.90 2,464,580.00 2,030,500.70 316,304.20 2,517,374.00 2,117,654.50GROSS PROFIT 50,781.70 1,653,299.00 1,042,092.30 311,883.00 1,698,970.00 1,021,818.20 512,430.20 2,391,327.00 1,323,037.50 676,330.70 2,873,100.00 2,018,878.40

Selling General & Admin Expenses, Total 391,199.40 863,492.00 543,082.00 407,176.30 925,403.00 529,454.00 446,614.80 956,394.00 523,597.20 523,972.50 1,081,944.00

765,662.90

Depreciation & Amortization, Total 40,578.00 175,294.00 94,129.20 72,943.70 202,841.00 94,402.60 37,362.60 245,801.00 -- -- 209,586.00 --

OTHER OPERATING EXPENSES, TOTAL 431,777.40 1,038,786.00 -- 480,119.90 1,128,244.00 -- 483,977.40 1,202,195.00 -18,507.30 523,972.50 1,291,530.00

39,758.20

OPERATING INCOME -380,995.70 614,513.00 637,211.20 -168,237.00 570,726.00 623,856.50 28,452.80 1,189,132.00 505,089.80 152,358.20 1,581,570.00 805,421.20Interest Expense -30,554.20 -204,168.00 404,881.10 -20,797.50 -228,591.00 397,961.70 -10,546.20 -198,439.00 817,947.70 -38,612.90 -144,653.00 1,213,457.20

Interest and Investment Income 294.5 63,376.00 -125,720.30 1,148.10 29,435.00 -70,789.10 932.1 33,720.00 -65,965.80 4,258.50 43,591.00 -139,048.70NET INTEREST EXPENSE -30,259.70 -140,792.00 45,837.00 -19,649.40 -199,156.00 47,654.30 -9,614.00 -164,719.00 59,290.70 -34,354.40 -101,062.00 68,895.80Income (Loss) on Equity

Investments -- 430 -79,883.30 -- 140 -23,134.80 -- -- -6,675.10 -375.7 ---70,153.00

Currency Exchange Gains (Loss) -131,194.90 -202,121.00 742 94,565.00 230,193.00 -32,471.10 -2,312.90 59,318.00 -12,577.90 -8,056.70 10,581.00 -3,677.70Other Non-Operating Income

(Expenses) -6,660.30 -53,909.00 -23,960.70 -48,175.50 -41,211.00 7,193.70 -26,803.30 -58,662.00 -- -67,991.90 -7,381.00--

EBT, EXCLUDING UNUSUAL ITEMS -549,110.60 218,121.00 301,779.10 -141,496.90 560,692.00 349,549.40 -10,277.50 1,025,069.00 798,694.70 41,579.50 1,483,708.00 1,139,626.50

Merger & Restructuring Charges -- 12,773.00 -- 54,028.40 -- -13,483.60 -- -- -91,557.40 -- -- -1,943.70

Gain (Loss) on Sale of Investments -- 5,206.00 453.3 -- -- 2,294.40 -672.8 -- -2,948.50 -- -- -12,720.20

Other Unusual Items, Total 380,615.80 -- 668.7 -60,013.40 -- -- -- -- -- -- 26,816.00 --Other Unusual Items 380,615.80 -- 668.7 -60,013.40 -- -- -- -- -- -- 26,816.00 --

EBT, INCLUDING UNUSUAL ITEMS -168,494.80 236,100.00 302,901.20 -147,481.80 560,692.00 338,360.20 -10,950.30 1,025,069.00 704,188.70 41,579.50 1,510,524.00 1,124,962.50

Income Tax Expense -17,810.50 71,120.00 163,988.90 5,185.50 164,024.00 136,414.90 -14,606.50 280,850.00 200,516.40 15,273.00 385,353.00 386,925.00Minority Interest in Earnings 12.5 1,975.00 -35,184.70 0.1 -11,051.00 -40,185.30 -0.1 -14,001.00 -74,484.80 -46.5 -54,968.00 -130,429.60

Earnings from Continuing Operations -150,684.30 164,980.00 138,912.30 -152,667.30 396,668.00 201,945.30 3,656.20 744,219.00 503,672.30 26,306.50 1,125,171.00

738,037.60

NET INCOME -150,671.80 166,955.00 103,727.60 -152,667.20 385,617.00 161,760.00 3,656.10 730,218.00 429,187.50 26,260.00 1,070,203.00 607,608.00NET INCOME TO COMMON

INCLUDING EXTRA ITEMS -150,671.80 166,955.00 103,727.60 -152,667.20 385,617.00 161,760.00 3,656.10 730,218.00 429,187.50 26,260.00 1,070,203.00 607,608.00NET INCOME TO COMMON

EXCLUDING EXTRA ITEMS -150,671.80 166,955.00 103,727.60 -152,667.20 385,617.00 161,760.00 3,656.10 730,218.00 429,187.50 26,260.00 1,070,203.00607,608.00

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Analysis on VIVA’s Internal Environment

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Core Competence

• Focuses on delivering content including news, sports, and lifestyle through the convergence of television services, the internet, and mobile phones. VIVA owns and manages two FTA TV stations with national coverage: ANTV, tvOne and VIVAnews.com.

• Through integrated operational synergies, VIVA has been able to push cost efficiencies and operational stability and enhance its competitiveness in order to compete amid intense competition in the Indonesian media industry.

• In order to expand distribution of its content, VIVA has undertaken various cooperative proceedings with the telecommunications provider and has taken advantage of social media networks so that its content can be received via mobile phones and internet platforms.

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VIVA’s Climbing a growth staircase

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Capability platform

• The emphasis on the five main pillars of the company. The five main pillars are – A healthy financial performance, – The organizational structure is responsive to changes, – System and a work environment that is modern and

dynamic, – Human resource management the competitiveness of

high-power and cultured, – As well as the consistent application of good corporate

governance (Good Corporate Governance- GCG).

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• Being media company option manufacturer ( advertisers ) through good relations and communication more intensive cooperation and more comprehensive.

• Into parts, not just a spectacle, of Indonesians through is constantly present content program line with trends interest viewers, and lifestyle obviously with the best quality broadcast;

• Always present accompanying viewers in every platform and canals, especially where viva can build a two-way dialogue with viewers through the medium of the internet and social networks.

• Forming communities most unique most modern and most loyal in Indonesia.

• Continue to maximize preeminence to hold utilizing the momentum.

Value Proposition

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VIVA’s Business model CanvassKey Partners Advertiser Ads Agency -Foreign News Agency (APTN, SNTV, VOA)IT Vendor (JAVA & Linux) Broadcasting infrastructure Vendor Social Media/ Social NetworkUniversities Telecommunication Provider (TELKOM, Indosat)

Key Activities Program Design Program DevelopingIn-House ProductionMarketing Selling R&DImplementation of Good Corporate Governance (GCG)CSRTechnology Development ((3G Satelite) Learning Center

Value Proposition Focus Provision content news, sport and lifestyleProviding a Good ProgramProviding a Good Quality of Program Providing Unique & Interesting Program Providing Online Portal News

Customer RelationEvent Program

Customer SegmentSES ABCD(Urban & Sub Urban)

Key Resources Creative TeamIT ExpertEmployee JournalistR&D Team Marketers

ChannelFree-to-Air Television (FTA) – National (ANTV & tvOneOnline Media (Website) Portal Online Media (Portal VIvanews.com)AdvertisementMarketing Kit

Cost Operational CostProgram Development CostMarketing CostGeneral & Administrative CostResearch & Development ICT CostPeople Development Cost

Revenue StreamAdvertising Revenue SponsorshipInvestorPartnershipIn-House Production

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Review of VIVA’s past/current competitive strateg(ies)

Innovation Partnership Leadership & Culture

Quality & Coverage

To improve efficiency People Profit

Focus on news. Sport and lifestyle programs

Some excellent & Unique program

Purchase licenses from overseas : BBC Worldwide Limited, Associated Press Television News Limited, Reuters and others

Local Contributors : Surabaya, Medan and Makassar

Foreign correspondence (news agencies) : APTN, SNTV, Reuters , VOA, and others.

Commitment to the implementation ofGood Corporate Governance (GCG)

Building 37 transmitters throughout Indonesia,

Technology Development : broadcasting equipment outside broadcasting van ("OBvan") & 3G facility tvOne Satellite News Gathering (SNG) that uses the Global System for Mobile Communications (GSM) to direct the news coverage (live).

Consolidating & Synergy all BU’s

increased the number of in-house production of 53% in 2008 to 86% at the end of the year 2011.

the acquisition of non-news content and news from various production houses and distributors of leading through a rigorous selection process.

“Bakrie Learning Center” dan “KampusOne”

Conducting the process of expanding access to broadcast and production process is commercialized

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Financial Highlight 2007-2011

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Consolidated Income Statement

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Recommendations

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VIVA’s New Business Model CanvassKey Partners

External : Advertiser Ads Agency -Foreign News Agency (APTN, SNTV, VOA)IT Vendor (JAVA & Linux) Broadcasting infrastructure Vendor Social Media/ Social NetworkUniversities Telecommunication Provider (TELKOM, Indosat)

Internal : Editorial DeptHR DeptIT DeptGAL DeptMarket DeptFinance DeptOther BU’s

Key Activities Program Design Program DevelopingIn-House ProductionMarketing Selling R&DImplementation of Good Corporate Governance (GCG)CSRTechnology Development (3G Satelite)Learning Center

Value Proposition Focus Provision content news, sport and lifestyleProviding a Good ProgramProviding a Good Quality of Program Providing Unique & Interesting Program Providing Online Portal NewsMulti platformsCreate business information program

Customer RelationEvent Program Community Program

Customer SegmentSES ABCD(Urban & Sub Urban)

Key Resources Creative TeamIT ExpertEmployee JournalistR&D Team MarketersDigital Media ExpertPublisher Expert

ChannelFree-to-Air Television (FTA) – National (ANTV & tvOneFree-to-Air Television (FTA) – Local TV Print Media Pay TVRadio StationDigital MediaOnline Media (Website) Portal Online Media (Portal VIvanews.com)AdvertisementMarketing KitMobile Device

Cost Operational Cost; Program Development Cost; Marketing Cost; General & Administrative CostResearch & Development; ICT CostPeople Development Cost

Revenue StreamAdvertising Revenue; Sponsorship; Investor; PartnershipIn-House Production RevenueContent Provider Revenue

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Three horizon framework

HORIZON 1Extend and defend core

businesses

HORIZON 2Build emerging businesses

HORIZON 3Create viable option

PORTOFOLIO MOMENTUM

Resources allocation to boost portfolio.

VIVA’s capability represent source of advantage

Exploited the VIVA’s capability into new market

New partnersBuild new businesses (radio, news paper and magazine)

MERGER & ACQUSITION (M&A)

Global RecognitionGlobal Presence

Brand Equity

co-operation withforeign news agencies

SHARE GAIN

VIVA drive increase commercial advertising,

increasing market share and create operational excellence

VIVA’s proposition and/or delivery model with constantly present

content program line with trends interest viewers, and lifestyle obviously with the best quality

broadcast;the repair quality of content by

airing programs unique and interesting

Multiplatform media business model

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VIVA’s Staircase

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Implementation (2)

Improve its operational and financial performance : 1. Improved profit and margin by continuing to focus on

producing a quality program of in-house. 2. Optimization of operational activities and create synergies

between television networks and online news portal. 3. Improved and broadened the scope of the television is not

paid on an ongoing basis to increase the share of viewers and increase revenue from advertisers.

4. Adds sports content platform for distribution. 5. Develop content distribution through the internet platform. 6. Maintains and strengthens the company's position as the

market leader in news coverage

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Implementation (2)

Increase ad revenue VIVAnews is as follows: 1. extending the market segmentation of advertising towards

products for target women with a way to make portal specific to a target market of women (VIVAlife).

2. Expand market potential towards products for soccer fans with a target market how to create special web VIVAbola.

3. Expand and develop more programs are community-based interactive (photo blog contest, competition, etc.).

4. Developing activities off commercial water aligned with content VIVAnews (fun bike, cooking class, etc.)

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