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Marketing Plan A B S - C B N T V P lu s

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Table of Contents !

Company Profile!...........................................................................................................................!3!

Corporate Strategy!...................................................................................................................!3!

Products!.....................................................................................................................................!3!

Company Mission and Corporate Values!.............................................................................!4!

Mission!...................................................................................................................................!4!

Company Values!..................................................................................................................!4!

Executive Summary!......................................................................................................................!4!

The New Media and Entertainment Landscape!..................................................................!4!

Traditional Broadcast Television Value Chain in the Philippines!......................................!5!

Marketing Overview!.....................................................................................................................!6!

Market Demographics!.............................................................................................................!6!

Market Trends and Target Market Growth!............................................................................!7!

Long-Form Video!..................................................................................................................!8!

SWOT Analysis!..........................................................................................................................!8!

Strength!..................................................................................................................................!9!

Weaknesses!........................................................................................................................!10!

Opportunities!.......................................................................................................................!10!

Threats!.................................................................................................................................!11!

Competitive and Industry Analysis!......................................................................................!12!

Broadcast Rivalry in the Philippines!................................................................................!12!

ABS-CBN versus GMA TV Ratings Comparison!...........................................................!14!

Product Overview!...................................................................................................................!17!

Keys to Success and Critical Issues!...................................................................................!19!

Environmental Analysis!..............................................................................................................!20!

Macro-environmental Factors!...............................................................................................!20!

PESTEL Analysis!.................................................................................................................!20!

Porter’s Five Forces!............................................................................................................!22!

Micro-environmental Analysis!...............................................................................................!23!

Boston Consulting Group (BCG Matrix)!..........................................................................!23!

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Departments within the company impacting the marketing planning!........................!23!

Marketing Strategy!.....................................................................................................................!24!

Mission!.....................................................................................................................................!24!

Marketing Objectives!.............................................................................................................!24!

Financial Objectives!...............................................................................................................!25!

Target Market!..........................................................................................................................!25!

Value-based Marketing Approach!...................................................................................!25!

Access to Five Channels – Only from ABS-CBN DTT!...................................................!26!

Excellent Customer Service!..............................................................................................!27!

Accessories!.........................................................................................................................!27!

Positioning Statement!............................................................................................................!27!

Strategy Summary!..................................................................................................................!27!

ABS-CBN Competitive Strategy!.......................................................................................!28!

Organizational Objectives!.................................................................................................!28!

Marketing Mix!..............................................................................................................................!30!

Product!.....................................................................................................................................!30!

Price!..........................................................................................................................................!32!

Promotion!.................................................................................................................................!32!

Place!.........................................................................................................................................!34!

TV Plus Sales Volume Targets!..............................................................................................!36!

Sales Volume Projection!........................................................................................................!36!

3-Year Pro-forma Profit and Loss Statement!......................................................................!37!

Year 1 – Profit & Loss Statement!..........................................................................................!38!

Year 2 – Profit & Loss Statement!..........................................................................................!38!

Year 3 – Profit & Loss Statement!..........................................................................................!39!

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Company Profi le ABS-CBN Corporation is the Philippines’ leading information and entertainment multimedia conglomerate. The Company is primarily involved in television and radio broadcasting, as well as in the production of television and radio programming for domestic and international audiences and other related businesses. ABS-CBN produces a wide variety of engaging, world-class entertainment programs in multiple genres and balanced, credible news programs that are aired on free-to-air television. The Company is also one of the leading radio broadcasters, operating eighteen radio stations throughout the key cities of the Philippines. ABS-CBN provides news and entertainment programming for nine channels on cable TV and operates the country’s largest cable TV service provider. The Company also owns the leading cinema and music production and distribution outfits in the country. It brings its content to worldwide audiences via analog, digital, cable, satellite, online and mobile. Corporate Strategy Transforming lives by changing the media landscape is both ABS-CBN’s vision and passion. The key thrusts of ABS-CBN’s business strategy are:

• Anytime, anywhere, in any device or medium

As our audiences demand greater control over how and when they will consume our content, we will ensure our continued relevance by distributing our content in the widest array of platforms that technology will allow. Our audiences will be able to reach us anytime at any place in any medium.

• Building on our core strength in content creation

While everything around us changes – the technology, the production process, the medium used to access our content – our core ability to create quality content that touch, inspire and empower our viewers must remain constant. We will continue building on our core strength of content creation.

• Maintain a strong f iscal posit ion and bring value to our stakeholders

We will derive the most synergies possible between our content and distribution business. We will consciously operate more efficiently and cost-effectively, as we deliver greater value to our audience, customer, clients, partners and shareholders.

Products ABS-CBN is a major commercial television network in the Philippines. It is the oldest and the leading television network in the country. It is a unit of the media conglomerate ABS-CBN Corporation. It was launched on October 23, 1953 as Alto Broadcasting System and is among the first commercial television networks in Asia. Its headquarters is in Quezon City with regional offices and news bureaus in over 25 provincial areas throughout the country. The flagship television station of ABS-CBN in Metro Manila is DWWX-TV (VHF channel 2) while provincially, the network operates through its Regional Network Group of 25 originating stations, 38 relay stations and 8 affiliate television stations. Its programming is also available outside the Philippines as The Filipino Channel.

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Company Mission and Corporate Values Mission

! We exist in the service of Filipinos worldwide, as well as of all humankind. ! We exist to inform and to entertain through creative content for any distribution

platform. ! We innovate, diversify and expand into enterprises where our expertise in

content opens new business and service opportunities. ! We bring out the best in the Filipino, and reflect true Filipino sentiment

Company Values In striving to achieve its company vision, ABS-CBN upholds the following values:

! Meritocracy. We believe in caring for our people. We believe in granting commensurate rewards at the right time for good performance.

! Excellence – Judgment and Drive for Results. We use best judgment to balance speed, quality and cost to attain best returns.

! Excellence – Embracing Change. We continuously explore new ways of doing things. We challenge even our past successes to achieve breakthroughs and to ensure our continuous improvement.

! Excellence – Risk-Taking. In a constantly changing competitive environment, we take action based on a careful assessment that opportunities and rewards are worth the risks. We ensure that everything possible is done to mitigate those risks.

! Teamwork – Company Interest and Transparency. We place the good of the team over our own personal interests.

! Teamwork – Ownership. We, individually, take personal accountability for our role, output and decision.

! Teamwork – Confronting Confl ict. We believe in the constructive resolution of any conflict. We also believe in taking accountability for any conflicts caused.

! Teaching and Learning. Our work relies on constant teaching and learning. We train our people to become better than ourselves. We define areas for development and take deliberate action to fill our skill gaps.

! Honesty and Integrity. We deliver on our commitments. Our values are non-negotiable.

Executive Summary

The New Media and Entertainment Landscape More companies are now pressed to go ahead with their digital transformation initiatives. Consumers are influencing content and services in formidable ways. Companies who can adapt quickly and capable to offer their content on every screen wins the game. Consumers have continued to take control of their own entertainment programming – downloading, recording, delaying and watching multiple screens simultaneously and a corresponding shift among media and entertainment businesses. These businesses are increasingly gathering data and analyzing consumer behavior to create the best digital experiences and to monetize them.

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Tradit ional Broadcast Television Value Chain in the Phil ippines

The past year showed a number of business models that appeared in the media and entertainment industry that were built around the needs of consumers. The coming years will prove that these new models are taking off requiring the emergence of new relationships and understandings in a very diverse and ever-changing ecosystem.

Today, media companies face the challenges of new operating models, alternative measurements for advertising, applications for the TV, and the continuing breakdown of content distribution windows and growing mainstream use of crowd-funding for media projects.

Addressing these challenges will require media and entertainment companies to begin rethinking their relationships with the value chain which is becoming more complex and disaggregated. National Telecommunications Commission announced in June 2010 that the Philippines would adopt the Japanese Integrated Services Digital Broadcast-Terrestrial (ISDB-T) standard over the Europe’s DVB-T for digital television, and issued a circular stating that the country’s broadcasters must discontinue their analog services by the transition deadline of 11:59PM on December 31, 2015. Digital Terrestrial Television (DTT) is an implementation of digital technology in the television service intended to provide greater number of channels and/or better quality of picture and sound through a conventional aerial antenna instead of a satellite or cable connection. Integrated Services Digital Broadcast-Terrestrial (ISDB-T) is a flexible digital television (DTV) transmission system that is capable of providing 3 levels of hierarchical modulation (audio, video and data services) to fixed, mobile and handheld terminals without the need to for an additional transmission facility. A technical working group shall be convened for drafting implementing rules and regulations. Include 2nd generation of DTT standards. And an update on the prevailing market price of DTT set-top-boxes (STB). The commission will be using the ultra-high frequency television channels from 14 to 51 (470-698 MHz) for DTT broadcast service deliberating channels 14 to 20 (470-512MHz) which is being used for fixed and mobile services. According to the NTC’s draft rules, TV companies are required to simulcast their DTT service and analog service within a year upon the effectivity of the IRR. A bandwidth of 6 megahertz shall be assigned for each authorized DTT service per service area. The NTC also allocated the frequency bands 512-698 Mhz (Channels 21 to 51) for the implementation of the DTT service. "A duly authorized DTT service provider shall be have the option in its application to the Commission to adopt either single or multi-program HDTV format or single or multi-program SDTV format or any combination thereof for its digital service," NTC said, adding that any subsequent change in the program format shall require prior written approval from the Commission. The agency said the provision of new programs in addition to the analog legacy program is encouraged, adding that, "The provision of HD programs is likewise encouraged." The draft rules provide that the transition and migration from analog TV to DTT service shall be based on a transition plan formulated by the NTC in consultation with the broadcast industry. No analog TV operation shall be allowed after the analog shut-off (ASO), which will be set by the agency. Dealers of brand new TV receiving sets shall indicate in each TV set whether the same can receive analog signal only and will require a set top box or whether the same can receive ISDB-T programs.

Gone will be the days when one has to climb on top of the roof and swivel the antenna to find a better reception. In digital TV, even if the antenna is dancing there will be less worry on the loss of signal. Ultimately the reason for the government’s adoption of DTT is because of the technology’s capability to allow transmission of Emergency Broadcast System.

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Marketing Overview The scope in 2010 of the new MORES (Marketing and Opinion Research Society) leadership has decided to take a fresh and inclusive approach in putting in place the best possible SEC (Socio Economic Classification) system. A two-year program aims to develop a harmonized socioeconomic classification system, now called 1SEC, for use by the marker research industry. There are 9 SEC household groupings which tend to spend in the same way based on the 36,000+ households included in the 2009 Family Income and Expenditure Survey (FIES). The least spending households are grouped under Cluster 1 while the highest spending households fall under Cluster 9. (For practical purposes, MORES is adopting number labels instead of letter labels to minimize association with previous SEC segments (i.e. A, B, C1, C2, D, E). As shown in the figure below, about 45% of Philippine homes belong to the three least spending household groups (i.e. Cluster 1-3) while only about 20% belong to the top 3 spending household groups.

1Sec Pyramid, Total Phil ippines

Market Demographics

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1 Social scientists as well as marketers on the lookout for new segments to sell their products and services are in a better position to analyze opportunities using the Gini ratio. The GINI ratio distribution of some indicators for 1SEC in Figure 8 shows that ownership of vehicles and appliances such as microwave oven, air conditioner, and computer are the most discriminating between the rich and the poor. Meals out of the home, purchase of books and admission tickets for shows are also provided in the computation of the Gini indicator even if these were not significant in the modeling. As shown in the Gini, television remains to be one of the most common appliance a typical Filipino family has. The television has one about 80% market penetration.

Market Trends and Target Market Growth Out of the 20 million households in both urban and rural areas 80% are said to own at least 1 TV set, 68% PC desktop, 58% laptop, 64% smartphone and 17% tablets. The average viewing time is 5 hours on a weekday in urban areas while 4 hours in rural areas. The 40% of the combined urban and rural households watch TV during prime time.

While Smartphones are the most frequent companion devices during simultaneous usage, TV still comes 2nd since consumers still prefer to watch longer form content in bigger screens.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1 Gini Ratios for Selected Indicators; Source: www.nscb.gov.ph

64%$80%$68%$PC$

58%$Laptop$

17%$

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Source: Ooyala Global Video Index Q2 2014 – Survey Conducted in Boston, USA.

Long-Form Video Once viewers get to that long-form content, however, it’s all about screen size. More than half the time spent watching on connected TVs is with video longer than 60 minutes; tablet users spent 19% of their time with content longer than 60 minutes, while desktops and phones were a virtual tie at 8% and 9% respectively. For video longer than 30 minutes, time spent on connected TVs was 65%, tablets 42%, desktops 29% and mobile devices 25%. On average basis, desktop, mobile and tablet users all spent more time watching 10–30 minute videos than any other form, followed by 30–60 minute videos.

SWOT Analysis As the Communications, Media and Entertainment Industry is continuously bombarded by incremental and radical innovations brought by new technologies, the strength, weakness, opportunity and threat (SWOT) matrix is continuously adapting as well.

As the Communications, Media and Entertainment Industry is continuously bombarded by incremental and radical innovations brought by new technologies, the strength, weakness, opportunity and threat (SWOT) matrix is continuously adapting as well.

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Strength First mover advantage . A first-mover advantage is the firm’s ability to be ahead of its competitors in launching a new product or service to the market. The advantage is that the first-mover can gain dominance over the market as the consumers will later on find it inconvenient or more expensive to switch to a different product or brand. The first-move advantage will also be ahead in the technological learning of the new product. Lastly, the first mover will have more improved and stable infrastructure by the time its competitors are able to set-up. For instance, ABS-CBN had already invested PhP2 Billion in setting up and preparing for the DTT conversion. GMA only had PHP 1 Billion investment and ABC 5, PHP 500,000.00. The investments made by ABS CBN as a first-mover is much bigger to its competitors’ investment on DTT combined. It will take time for GMA and ABC 5 to refine its DTT infrastructure and services to be at par with ABS-CBN. Strong brand name and copyrights . Philippines responds well to pressing issues on copyright infringements and takes seriously in enforcing laws to activities that threaten the communications, media and entertainment industry. For one, Republic Act 8293 or a law also known as Intellectual Property Code of the Philippines was enacted last January 1, 1998. This law is patterned after United States Copyright Law which intends to protect patents, trademarks and forms of Intellectual Property. This law is enforced through an agency called Intellectual Property Office (IPO). Another laws among others are the Cybercrime and Anti-piracy law which were enacted into law 2012 and 1974. These laws are strictly enforced by different enforcement agencies with the Philippine National Police. One board who is actively enforcing such laws is the Optical Media Board currently chaired by Ronnie Rickets, a famous actor.

Brand names are very strong in the Philippine market for two reasons. The first reason is that the Philippine economy is growing as shown in previous sections where the Philippines has recently acquired investment grade rating from various internationally recognized rating companies such as S&P, Fitch and Moody’s. Apart from this Philippines has one of the strongest GDP’s in the Asian region posting a 6.8% GDP Growth in 2012 and 7.2% in 2013 a number which put Philippine economy as the 2nd strongest in Asia, 0.5% away from an economic giant, China. In 2014, GDP Growth is expected at 6.8%, still a strong growth for the country. With these things being said, what it means is that continued progress in the Philippines will move its people from

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poverty to the middle class level. According to market analysts, brand image is very strong to progressing economies especially to those who are rising from the poverty to becoming a middle class. Apart from such market behavior, the Asian market, particularly the Philippine market is particular to a brand because of association. Associativeness of the Philippine market can be traced back from its culture of strong family ties, bayanihan and fiestas where people are brought closely together. This culture is very obvious to the 80’s and 90’s generation who buys toothpaste from a nearby retail store, “Pabili po ng Colgate.” Another example is the photocopying calles as “Pa-xerox” or softdrinks called as “Coke”. In the United States, companies rarely has to pay actors to promote their products on Television since Americans are more individualistic. In the Philippines, it is on the other end of the spectrum. Sometimes, even brand names had to be changed when introduced in the Philippine Market, one example would be the Toyota Aygo “I go” was changed to Wigo “We go”. Weaknesses Government Regulat ions . NTC is the regulating body tasked to oversee the transition of broadcasting companies from analog signals to digital signals NTC will monitor the implementation of all broadcasting companies within the next 12 months after the IRR (Implementing Rules and Regulations) team becomes ready with their plan on conversion from Analog to Digital TV. The government moving forward will be regulating the channel frequencies of each broadcasting station because the Emergency Broadcast System is one of the capability of the digital tv using ISDB-T. With such regulations, more policies and restrictions may be implemented by the regulated body (NTC) that may not allow the broadcasting companies to maximize their profit from the investments made for the Digital Conversion. This is very possible because it is new to the Philippines and the government is unsure on what steps to take forward to ensure that the DTV will be fully implemented as seamless as possible from the analog broadcast. Technology of Digit ial TV is highly avai lable . As early as now, set-top boxes are being sold in Quiapo at PhP1,000.00. These products are from China and it has the ability to receive all the Digital Transmissions being broadcasted except for those that are encrypted. With the technology being highly available, the investment made by ABS-CBN on the Set-Top Box is being challenged through price differentiation. With such technology being highly commercialized, future television makers can build their television with an internal STB, ready to receive ISDB-T frequency and display an HD image. Opportunit ies Potential for addit ional source of income . There are about 17 million television viewers and about 90% of those viewers are using free-to-air TV or non-cable. With the analog transmission being converted to digital TV, the 90% viewers may be a captive market. Just less than 10% or about 1 million of the free-to-air television viewers currently can make a valuable business proposition to encourage different companies to advertise as well on the DTT apart from its in-between commercials. The outlook for broadcasting market is very lucrative . Even if the rapid evolution of technology seems a nuisance and makes businesses in the media and entertainment industry moving a lot, the good news is that the content being produced by the business can be sold more than once. For instance, the television series in the United States such as the Walking Dead, Breaking Bad, etc are being produced using high definition qualities. These television shows are then re-packaged after it’s been showed in the television and sold at retail stores. So, the producer of the television series got its money back from the sponsorship of television commercials plus they can profit further from the income generated from the purchases of DVD’s sold in retails

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stores. The same content may also be sold in iTunes, amazon or play store also at a price. The future for broadcasting market therefore is promising. The customer base of television viewers may be declining and as a result, there are fewer advertisers who are willing to pay for a premium at such a small customer base. However, there is profitability of selling the content by exploiting other media devices where content may be delivered. Threats Market Acceptance . The DTT technology, being relatively new in the Philippines, is not very widely known. Competit ive Industr ies . In the advent of modern technology, the market has been exposed to international entertainment industries such as HBO, Discovery Channel, CNN, etc. With this, local television channels are not only competing with other local channels but with the rest of the world as well. Entry to the industry is becoming easier through the availability of internet. For instance, the JaMich couple who produced content from their youtube channel instantly became an internet sensation with millions of hits on their content and a steady growth of their fanbase. The couple were just childhood sweethearts who does not need very sophisticated infrastructure to broadcast their content over the internet. All they needed was a video camera, a computer and an internet connection. Probably an investment no bigger than $5,000. Another instance is the growing popularity of independent “indie” films. Regular films usually cost in millions of Pesos. However, with the high availability of HD Cameras at a much affordable cost, it becomes easier to produce a film, its distribution network is through the internet or small movie houses. The competition in entertainment is not only from its peers who also sell contents but from other industries that offer the market a different way of receiving the content. For instance, with the use of the internet through various media such as laptop, computers, and smart phone, one may watch a specific television episode anytime, anywhere. The market does not need to be home sitting on a couch at a specific time to be able to watch a television show or a live sports coverage. Consumers can access them now through different media devices anytime anywhere. Thus, the telecommunications company offering internet service is indirectly competing with the television broadcasting industry. Theft of Our Entertainment Content . Despite the laws on Intellectual Property Rights, Cybercrime Law and Anti-piracy law, high availability of content from entertainment industry is easily accessible through internet offered by Telecommunications companies and the use of various media (i.e. Computers, Laptops, Tablets, Smart Phones). For instance, a television series that had recently aired can easily become available in youtube, vimeo and other video streaming sites within minutes. These videos are shared by some users or groups in an effort to gain significant amount of hits and subscription from their internet channel. If the hits or visits to their channels become consistent at the cost of the content owner losing profitability from the video beans shared, the channel owner gets advertisement from companies who had been utilizing the internet to market their products and services. This is much cheaper than the commercial aired over television shows where they have to sponsor or pay for the cost of the content being shown at the time the television advertisement is shown. Another example is the Optical Media Board who had been actively pursuing and performing regular raiding of pirated DVD movies. However, the following day after the raid is performed, the selling of the pirated movies continue. Torrent sites as well are widely available where high definition version of movies and television series may be downloaded on demand without having to pay for an amount by buying the same movies from retail stores or from online stores that sell those movies legally. Technology rapidly evolves that it had become difficult to control and regulate.

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Competit ive and Industry Analysis

Broadcast Rivalry in the Phil ippines There are currently 5 players in the market who is preparing for the DTT namely, Gem Net (Gem TV and Net 25 – Operated by Eagle Broadcasting Corporation), NBN (the country’s government television network), ABC 5 (owned by Manny Pangilinan), GMA (owned by Gozon’s) and ABS-CBN (owned by Lopez’). For the purpose of this paper, we will focus on the two major network who closely compete in terms of market share and initial investment made in the DTT Infrastructure with ABS-CBN at PHP 2 Billion and GMA at PHP 1 Billion.

There are 2 major broadcast networks in the Philippines that are also considered most popular TV stations; ABS-CBN Corporation and GMA Network.

Television networks and stations broadcast through satellite or “free” channels and cable channels. Most channels broadcast in both English and Filipino languages, and programming is mostly general interest. Networks also reserve certain stations for a specific format, such as music, news, animation, children's programs, educational TV, etc. Philippine TV programs range from canned foreign series to locally produced soap operas, news and information programs, variety shows, game shows, educational shows and reality TV, starred in by hosts of artists and celebrities. Most of these celebrities are connected to a specific television network.

ABS-CBN Corporation ABS-CBN Corporation is the Philippines’ leading media and entertainment organization. The Company is primarily involved in television and radio broadcasting, as well as in the production of television and radio programming for domestic and international audiences and other related businesses. ABS-CBN produces a wide variety of engaging, world-class entertainment

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programs in multiple genres and balanced, credible news programs that are aired on free-to-air television. The Company is also one of the leading radio broadcasters, operating eighteen radio stations throughout the key cities of the Philippines. ABS-CBN provides news and entertainment programming for nine channels on cable TV and operates the country’s largest cable TV service provider. The Company also owns the leading cinema and music production and distribution outfits in the country. It brings content to worldwide audiences via cable, satellite, online and mobile.

Source: Bloomberg; http://www.bloomberg.com/quote/ABS:PM

GMA Network

GMA Network, Inc. is a free-to-air broadcasting company principally engaged in television and radio broadcasting, the production of programs for domestic and international audiences, and other related businesses. The Company derives the majority of its revenues from advertising related to television broadcasting.

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Source: Bloomberg; http://www.bloomberg.com/quote/GMA7:PM

ABS-CBN Corporation & GMA Network Financial Highlights Comparison

ABS-CBN versus GMA TV Ratings Comparison

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There are currently 2 market research firms who are responsible for audience measurement of television ratings in the entire Philippines.

Kantar Media Phil ippines Kantar Media Philippines is one of the market research firms in the Philippines specializing in broadcast media. Kantar Media uses a nationwide panel size of 2,609 urban and rural homes. Audience panel covers and represents 100% of the total Philippine TV viewing population. The panel reports on 7 sectors, namely National Capital Region, Suburbs, North Luzon, Central Luzon, South Luzon, Visayas and Mindanao. Suburbs consists of 4 provinces, namely Bulacan, Cavite, Laguna, and Rizal. NCR and suburbs can be aggregated to show ratings for Mega Manila and all sectors can be aggregated to report Nationwide or National ratings.

AGB Nielsen Popularly called AGB Nielsen, is a market research firm in the Philippines specializing in broadcast media. AGB Nielsen conducts audience measurement of television ratings for certain areas in the Philippines, most notably in urban areas. At present, AGB Nielsen uses a panel size of 1,980 homes based solely in urban areas that represent 57 percent of the total Philippine TV viewing population. Kantar Media January – December 2013 Audience Measurement: Kantar Media released the annual audience measurement survey for the nationwide TV ratings which was topped by mostly ABS-CBN shows.

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Kantar Media 1st half 2014 Audience Measurement

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Product Overview Digital Terrestrial Television is a technological evolution of broadcast television and an advancement over analog television. It broadcasts land based signals. Digital Terrestrial Television (DTT) is an implementation of digital technology in the television service intended to provide greater number of channels and/or better quality of picture and sound through a conventional aerial antenna instead of a satellite or cable connection. The advantages of digital terrestrial television, are similar to digital versus analog in platforms such as cable, satellite, and all telecommunications; the efficient use of spectrum and provision of more capacity than analog, better quality images, and lower operating costs for broadcast and transmission (after the initial upgrade costs). A terrestrial implementation of digital television (DTV) technology uses an aerial to broadcast to a conventional television antenna (or aerial) instead of a satellite dish or cable television connection. Integrated Services Digital Broadcast-Terrestrial (ISDB-T) is a flexible digital television (DTV) transmission system that is capable of providing 3 levels of hierarchical modulation (audio, video and data services) to fixed, mobile and handheld terminals without the need to for an additional transmission facility. A technical working group shall be convened for drafting implementing rules and regulations. Include 2nd generation of DTT standards. And an update on the prevailing market price of DTT set-top-boxes (STB)

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The commission will be using the ultra-high frequency television channels from 14 to 51 (470-698 MHz) for DTT broadcast service deliberating channels 14 to 20 (470-512MHz) which is being used for fixed and mobile services. According to the NTC’s draft rules, TV companies are required to simulcast their DTT service and analog service within a year upon the effectivity of the IRR. A bandwidth of 6 megahertz shall be assigned for each authorized DTT service per service area. The NTC also allocated the frequency bands 512-698 MHz (Channels 21 to 51) for the implementation of the DTT service. "A duly authorized DTT service provider shall be have the option in its application to the Commission to adopt either single or multi-program HDTV format or single or multi-program SDTV format or any combination thereof for its digital service," NTC said, adding that any subsequent change in the program format shall require prior written approval from the Commission. No analog TV operation shall be allowed after the analog shut-off (ASO), which will be set by the agency. Dealers of brand new TV receiving sets shall indicate in each TV set whether the same can receive analog signal only and will require a set top box or whether the same can receive ISDB-T programs. In order to cope up with this change, analog TV’s will need to have a Set-Top-Box (STB). STB’s will perform the conversion of Analog Signals to Digital Signal allowing an analog TV to view television programs aired on Digital TV. These STB’s are highly available in the market. However not all STB’s offer the same content. Some STB’s for instance which will be sold by the rival networks (ABS CBN and GMA) are planning to sell their own STB’s that contains basic channels and some additional channels that may only be viewed through their own STB. These additional programs cannot be received by other STB’s because they are encrypted.

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Keys to Success and Crit ical Issues Currently the top 3 broadcasting networks in the Philippines’ value chain include broadcasting on Free-to-Air channels. They also have cable TV, IPTV, Satellite TV and the Digital TV. Of the television viewers, there is about 18.5 Million homes which are not connected to cable, satellite or IP TV. The challenge therefore for the top 3 companies is to capture as much market share from the 18 million homes into using the Set-Top-Boxes (STB) each broadcasting network intends to sell to the market.

Being a new product in the Philippines, selling Set-Top Boxes (STB) that offers broadcasting of Digital Content in both Analog and Digital TV has a lot of market uncertainty such as if the new standard will be replaced eventually or will the STB work for all television sets; will the new product be better than outdoor antennas, and many other questions. The real challenge for STB or for any new product is for it to cross the chasm as depicted by Rogers in his theory on Social Adoption Model. Rogers mentioned that at the early stage of commercialization, it is important to capture the innovators and early adopters first or get their buy in on the product which depicts 16% of consumers or about 2.8 Million homes with television that are not connected to cable TVs or similar subscriptions.

In order to capture the innovators and early adopters, it is critical for the product to have the wow factor. For this product to have a wow factor and to be working as expected (Kano’s Must-have) as well as added value (Kano’s Attractive quality), broadcasting companies must first invest on infrastructure. The analog antenna’s used for broadcasting must be slowly converted to be a medium for digital content transmission. At this point, ABS-CBN has invested PhP2 Billion while GMA

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and ABC 5 invested a total of PHP1.5 Billion. Apart from the infrastructure, the content offering of STB will be attractive if it will have more channels offered apart from the currently 5 available channels in STB (Net 25, NBN, ABC 5, GMA, ABS). So far, ABS is working on additional channels to be provided from their own STB product. These additional channels are encrypted so that only ABS-CBN’s STB’s will be able to receive them. Environmental Analysis

Macro-environmental Factors To assess the macro-environmental factors, PESTLE and Porter’s Five Forces analysis were conducted. PESTEL Analysis Pol i t ical. According to a news article from interaksyon.com, the government through its agency National Telecommunications Commission (NTC) is looking at shutting down the broadcast networks’ analog channels. They are aiming to migrate to Digital Terrestrial TV (DTT) in three to five years. Other government agencies such as National Economic and Development Authority (NEDA), Department of Trade and Industry and the Department of Science and Technology (DOST) - Information and Communications Technology Office have been tapped to work with the TV networks on planning the final shutdown. NTC is already finalizing the implementing rules and regulations (IRR) for this upcoming migration. Japan’s Integrated Services Digital Broadcast – Terrestrial (ISDB - T) was chosen to be the country’s sole standard for the delivery of digital TV broadcast service. The IRR will require TV networks to air both analog and digital service at the same time within a year once it has been implemented serving as a transition period before the complete shutdown. In addition, TV dealers will be required to indicate whether their TV units can receive digital signal only, analog signal only which will require a set-top box or both. Economic. According to World Bank in the first quarter of 2014, the services sector is the main driver of the Philippine economy. It contributed 3.8 percentage points to the overall growth. It also added that poverty incidence declined by 3 percentage points between 2012 and 2013 therefore lifting 2.5 million Filipinos out of poverty. These figures will mean an increase in consumer spending as more Filipinos are being employed by the service sector. Other industries driving economic growth are the Information Technology and Business Process Outsourcing (IT and BPO) industries. In 2013, the BPO sector recorded a $13.3 billion revenue from $1.3 billion in 2004.

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According to a PhilStar news article, Tholons consultancy in 2014 ranked Manila as the second-most-important BPO destination worldwide. The article continued that the Philippines have been forecasted to gain roughly $30 billion in foreign currency earnings from India. Given the data above, this will mean an increase on the working population which in return can increase the potential buyers that can afford the set-top boxes. Social. The youth is found to be the major consumers of digital media. A Mckinsey research showed that the youth aged 13-34 spends over 3x the time on their mobile phone than those aged 35-64. These mobile devices are found to be the prime choice for online activities across all age groups. Also, the youth is more inclined communicating on social networks than through emails which on the other hand the preference of the older age group. Social networks are becoming information and entertainment portals as they provide convenience on sharing videos, photos and other content (Chappuis, et al. 2013). This trend poses as a threat for the broadcast television service and might affect the adoption of set-top boxes particularly the Digital Terrestrial TV as there is a decrease on television usage because of the increase on portable device use. Technological. The influx of budget smartphones and other portable devices has an effect on the consumer base that watches TV. With the increase on devices that can deliver various content over the internet and the increasing clamor on social networking sites which also offer different media content, the TV-watching populace continues to dwindle. The fast-growing use of the internet which is further kindled by various offering of free data access from telecommunication companies, more consumers will prefer viewing media content on their portable devices. Internet speed also improves with the introduction of LTE and 4G signals increasing its capability to stream video and even live television shows. Legal. The National Telecommunication Commission (NTC) finalized the adoption of Japan’s ISDB-T as the Philippine standard for DTT through its Memorandum Circular No. 05-11-2013. NTC has the power to dictate and regulate broadcasting in the Philippines in pursuant to Executive Order (EO) No. 546, series of 1979, as amended. The IRR is yet to be finalized as it is still in its draft stage, but it has already gained support from one of its stakeholders such as Broadcast Enterprises and Affiliated Media (BEAM), the operator of the Free-to-Air Channel 312. Despite the growth of the Philippines’ working class, some might still be reluctant on purchasing DTT due to its price. Some might resort to smuggling these devices from overseas to acquire them at a cheaper price. Environmental. The erratic weather conditions in the Philippines can be favorable to the adoption of DTT as typhoons and heavy downpour affects the quality of broadcasting over an analog signal. Even in remote provinces until now, some television channels are not available due to a weak analog signal. The Philippines being an archipelago, some remote islands are having difficulty obtaining a strong analog signal which negatively affects their TV reception.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!2 http://www.mb.com.ph/draft-irr-on-digital-tv-gains-industry-support/ (Accessed: 11/23/2014)

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Porter’s Five Forces

Threat of New Entrants. DTT is already being used in many countries in Europe and in the US for a long time while in the Philippines it will be totally new. The countries who adopted DTT earlier than the Philippines are given to have more experience regarding this technology. Broadcast firms in those countries can penetrate the Philippines’ broadcasting industry and pose as a threat for the incumbent firms. Even suppliers of set-top boxes on those countries can be potential competitors for ABS-CBN. Threat of Substi tute Products or Services. The influx of cheap smartphones and other portable devices such as tablets can be substituted for television sets. These devices are capable of delivering different kinds of content and even perform more tasks such as internet browsing, text messaging and email sending. These devices are also able to play live television shows through the internet making it function like a typical television. NTC’s mandate to go digital will oblige other networks like GMA7 and TV5 to offer set-top boxes as well. The mentioned TV networks pose as threat to ABS-CBN’s set-top box as these networks also has the capability and resources to develop their own version of set-top box. Both have the content comparable to ABS-CBN. TV5 also has PLDT as these firms are both Pangilinan-led. Some television sets nowadays are also capable of receiving digital signals. This can also pose as a threat for ABS-CBN’s set-top box. Some cable operators such as Solar TV are potential competitors. Despite having monthly subscription fees, they can entice potential buyers of the set-top box by offering cheap monthly fees for more attractive attributes lacking on free-to-air channels in set-top boxes. Bargaining Power of Customers. Bargaining power of customers is high because of the internet. Various contents are now available through the internet and can be accessed for free anytime and anywhere the customers want through their portable devices. Also, DTT set-up-box are also available in the black market (Raon and Greenhills) at a much lower price. Bargaining Power of Suppliers. Given that the threat of substitutes is high for set-top boxes as more and more consumers are preferring smartphone or portable device usage compared to the television, suppliers of set-top boxes will have a low bargaining power. There are also televisions available that are capable of receiving DTT signals that do not require set-top boxes.

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Intensity of Competit ive Rivalry. The two stiff competitors of ABS-CBN are GMA7 and TV5, but ABS-CBN has more channels to offer. Some of the channels are actually available on cable TV through their sister company Skycable. If these channels are incorporated into their set-top boxes, they can offer a more value-for-money attribute. They also have other product offerings that can be bundled with the set-top boxes that might give them more leverage over their competitors.

Micro-environmental Analysis

Boston Consult ing Group (BCG Matrix)

Departments within the company impacting the marketing planning ABS-CBN’s top management is hands-on on the formulation of the marketing plan. It devises strategies that are aligned with the government’s mandate, particularly the adoption of Japan’s ISDB-T. Given that this product concerns the free-to-air TV, it will not be easy for ABS-CBN to entice the consumers to shell out money to buy the set-top box. Continuous market research is being conducted to better know the customer’s needs so that it can be incorporated to the product and somehow project a value-for-money feature. If the potential buyer sees that he/she can get more value from the amount that he/she is willing to pay, it is a very influential factor for them to actually buy the product therefore increasing its market acceptance. The marketing department works closely on this case as their market findings will be incorporated by the research and development team into the product. Suppliers who help create and deliver customer value. One of the major suppliers of ABS-CBN for the manufacture of set-up box is ADTH in China. ADTH manufactures the set-up boxes according to ABS-CBN’s specifications. Marketing intermediaries who help sel l , promote, and distr ibute goods. Content is the main product that ABS-CBN delivers to its customers. Through Globe’s facilities, ABS-CBN has been able to expand its reach and deliver its content to different platforms. Both are benefiting from their partnership as ABS-CBN has the content that Globe lacks while the latter has the infrastructure that the former needs.

Mar

ket G

row

th

high

low

Market Sharehigh low

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ABC-CBN also partners with other firms to better market their products. One of its strategies is to bundle their new product with another product to entice potential consumers and increase market awareness. This is apparent on ABS-CBN’s partnership with KakaoTalk. ABS-CBN mobile offered its subscriber free unlimited KakaoTalk chat and call services for three months. With this partnership, both firms are hoping that they will gain a solid customer base. For the distribution of ABS-CBN mobile’s SIM cards, ABS-CBN partnered with SM. SM has 49 malls located in key cities and provinces nationwide. However, not all have easy access to malls. To address this issue and reach far-flung areas, ABS-CBN partnered with Telepreneur Corp. (TPC), a multi-level marketer that offers mobile phone loading services through its members nationwide. TPC has almost 530,000 members. ABS-CBN can apply the same strategy from their mobile SIM card to their set-top box. They can partner with appliance stores such as Abenson, SM Appliance and Ansons to market their set-top box. Bundling it with television sets, especially does that are not capable of receiving digital signals can aid in selling the product. Marketing Strategy ABS-CBN’s marketing strategy is anchored in the company’s mission and vision which is “ABS-CBN exists in the service of the Filipinos worldwide”. Past CEO and now Chairman Eugenio Lopez III in the 2013 ABS-CBN annual report further strengthened this by saying “Being in the service of the Fi l ipinos is our mission – through good t imes

and bad. We were challenged to deliver on this l ike no other in recent memory. Your company … your Kapamilya responded in a manner that

you would be proud of.” In response to National Telecommunication Commission’s (NTC) plans to switch over to Integrated Services Digital Broadcast - Terrestrial (ISDB-T) digital transmission system to which ABS-CBN already laid the foundations since 3 years ago to make the company ready for the migration. Mission ABS-CBN Digital Terrestrial Television (DTT) mission is to provide content and services that will create shared experiences and magical transformations enhancing the overall desirability of its access products. Marketing Objectives

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The following are ABS-CBN DTT marketing objectives:

ABS-CBN DTT marketing objective is to capture 1 Million customer base by the end of 2015.

Advertising Sales Revenue Target of Php200Million by end of 2017. Financial Objectives DTT aims to increase return on capital for DTT investment from 6.19% to 10%. ABS-CBN was able to raise 6 Billion bonds that will be used partly for additional capital funding in building infrastructure for its Digital Terrestrial. Target Market ABS-CBN DTT targets 14.2 million non-cable TV households nationwide. Currently, no more than 52% nationwide receive the 2 leading channels in clear or tolerable quality. Value-based Marketing Approach ABS-CBN’s value proposition is built on strong brand equity of ABS-CBN content. Through DTT, ABS-CBN will be able to create shared experiences with our customers without paying monthly rate like cable customers.

Content Access, Anytime, Anywhere. Our DTT customers will enjoy access to our content at the platform of their choice.

ABS-CBN Mobile Prepaid Customers. DTT customers with ABS-CBN Prepaid Mobile active (with load balance) can access exclusive contents thru their mobile or DTT set-up-box.

Partner Channel. ABS-CBN DTT offers exclusive content for partners who want to provide different content to their own customers.

Specific$ Measurable$ Achievable$ Realis@c$ TimeCbound$

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Access to Five Channels – Only from ABS-CBN DTT Our DTT customers can enjoy not just one, but 5 channels for the enjoyment of the whole family. Surely, there’s something for everyone.

ABS-CBN – Linear Broadcast – Regular programming broadcast of channel 2. Cine Mo! - ABS-CBN made this movie channel exclusively for digital free TV. This channel will show local and some foreign films. This channel is mirror of Sky Cable’s Cinema One. Yey! – This is ABS-CBN DTT’s cartoon/anime channel created for kids which will show cartoon and anime programs previously.

Knowledge Channel - (KCFI) to have a new learning system using Knowledge Channel in digital free-TV format. Since the new millennium, Knowledge Channel has been in part of the ABS-CBN cable channels group and some of the schools do have their own cable TV systems just to offer Knowledge Channel in their respective learning subjects. With this, schools may no longer be connected to cable just to watch Knowledge Channel’s educational programs.

DZMM Teleradyo – News Channel - In line with the 25th anniversary of DZMM, they may now be switched on to free-TV. Since then, Teleradyo had undergone several changes, from including ABS-CBN News and Current Affairs programs, to strengthening its radio-TV landscape in offering the latest and breaking news straight to your television sets.

Partner Channel. This channel shows partner content. Other Channels. ABS-CBN DTT box not only offers ABS-CBN channels, but other channels as well. Other channels include GMA-7, TV5, Solar Channel and UNTV.

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Excellent Customer Service ABS-CBN DTT customers will need not to worry about concerns and issues of using the DTT box. ABS-CBN will provide 24/7 competent customer service agents that will readily answer customer’s concerns. Customers can also bring their DTT boxes to ABS-CBN’s accredited 3rd party service center.

Accessories ABS-CBN will continue to innovate its products and services. Part of the DTT box roadmap is providing accessories such as USB port wherein customers can watch the contents by downloading programs from ABS-CBN loading stations and watching the show through their DTT box. Another accessory is a karaoke child box wherein the karaoke box is loaded with songs that customers can use for the karaoke / sing-along capability. Posit ioning Statement Through ABS-CBN DTT, our customers will experience a revolutionize TV experience with a roadmap of services and our desire to uplift our customers’ lives.

Strategy Summary ABS-CBN Digital Terrestrial Television (DTT) mission is to provide content and services that will create shared experiences, and magical transformations enhancing the overall desirability of its access products. Its core value proposition is to go beyond the traditional TV based (linear airing) in order to create a differentiated and deeper relationship with our customer. ABS-CBN employs a product leader strategy type being the market pioneer in DTT. ABS-CBN’s Chairman Gabby Lopez said during his interview that ABS-CBN is 3 years ahead of its competition in terms of rolling out DTT. This will give the company first mover advantage as the country transitions from analog to digital. ABS-CBN is now ready to expand its free-to-air channel offerings to an additional five channels from two

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channels currently once the implementing rules and regulations are released by NTC. 3

ABS-CBN Competit ive Strategy

ABS-CBN understands the importance of technology in order the gain competitive advantage. There are countless variations in the competitive strategies that the companies employ mainly because each company’s strategic approach entails custom-designed actions to fit its own circumstances and industry environment. ABS-CBN seeks to differentiate the company’s products and services to its competitors in ways that would appeal to a broad spectrum of customers. Guzak (2005) believes that the differentiation strategies are attractive whenever buyers' needs and preferences are too diverse to be fully satisfied with a standardized product or by sellers with identical capabilities. A company attempting to succeed through differentiation must study buyers' needs and behavior carefully to learn what customers consider important, what they think has value, and what they are willing to pay for. Then the company has to incorporate buyer-desired attributes into its product or service offering that will clearly set it apart from rivals. Competitive advantage results once a sufficient number of customers become strongly attached to the differentiated attributes.

Organizational Objectives ABS-CBN DTT business unit sets the objectives down to the different levels of the organization. This will ensure all the functional units work cohesively to attain the over-all business objectives of ABS-CBN. Corporate Strategy ABS-CBN strategic objective is to increase return on capital thru DTT investments from 6.19% to 10% in 5 years. Functional Organization Objectives The corporate strategy to launch DTT as a new business unit for ABS-CBN’s is a mandate from the board of directors of ABS-CBN and various stakeholders from ABS-CBN subsidiaries like Lopez Holdings, Sky Cable Inc, etc. It is imperative that divisions should create their own management objectives that can then translate to functional

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!3 http://www.abs-cbnnews.com/business/02/10/14/abs-cbn-sets-profit-guidance-p18-b-p2-b-2014

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objectives for each unit. Marketing Objective and Action Plan The Marketing plans and strategies are very critical for any new product launches. The Marketing department works hand-in-hand with the Engineering department to ensure product features that can set the differentiating factor for ABS-CBN’s TV Plus. The marketing head’s objective is to increase ABS-CBN’s audience share to 35% in Mega Manila and 45% nationwide respectively. The dominance in audience share can entice advertisers to place their advertisements in ABS-CBN. ABS-CBN is capable of distributing its content on all platforms available currently. What are important for marketing to plan is its go-to-market (GTM) initiatives to ensure that distributors and agents can deploy, sell and distribute boxes as per planned rollout.

Operations Objective and Action Plan The operations play a key role in ensuring that after-sales support is available to the customer anytime. Otherwise, the customer may choose another set-up box provider and ABS-CBN may lose its leverage on having the majority of the market. The operation is also responsible in assuring the warehouses are properly stocked-up with TV Plus set-up boxes based from the sales projection provided by the Sales & Marketing team. Operation should use proper forecasting technique to ensure supply of DTT boxes for new customers and replacements for defective ones.

Human Resources Objective and Action Plan We understand that people are an important asset in the organization. Strong organizational capability is also a competitive strategy in itself. ABS-CBN needs to properly complement manpower in order to make sure the proper implementation of its plans for rollout. The key challenge for DTT HR is to beef up hiring of competent sales personnel that can fill-up sales position nationwide. This is critical for the deployment of distributors and agents in the field so as to ensure that sales target are met.

Finance Objective and Action Plan Finance role in the organization is sometimes viewed as a deterrent in executing sales and marketing plans since they often disagree with decisions that requires cash outflow. One important objective for Finance is to create a viable incentive plan that will inspire the sales and distribution team to produce results and meet their targets.

Engineering Objective and Action Plan Engineering or the R & D department work in heavy collaboration with the marketing department. This will ensure that marketing can continuously improve its product features and leverage of product innovations to retain and acquire more customers. The engineering department objective is to come-up with 3-year roadmap for the features of set-up box that can complement the product offering of TV Plus. An example of this is the karaoke child box wherein customers can attach to their set-up box to enjoy entertainment while at the convenience of their home.

Information & Technology Objective and Action Plan The IT department plays an important role in ensuring the systems and infrastructure are in place for the effective and efficient flow of processes. The data collected in all systems can also provide insight for the Marketing and CRM departments to analyze

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patterns and behaviors of the customers that they can later use to improve existing products or formulate new product strategy.

Marketing Mix The marketing mix also known as the “4 P’s of marketing”, composed of the product, price, promotion and place, is a critical management initiative used for ABS-CBN’s TV+ in ensuring that key strategies and decisions are all aligned from product creation to product positioning and commercialization.

Product ABS-CBN’s TV+ will target the non-cable TV households nationwide, anchoring on the organization’s core competency which is content creation. Being true to the promise of being of service to Filipinos, ABS TV+ will be offering additional five channels on top of the regular linear

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broadcast which are the shows being aired in Channel 2. These are five different channels that will cater to different preferences of our customers. Based on our survey, ABS TV+ can cater to the top 4 additional channel preferences, with 84% or 42 out 50 respondents favoring English movies the most: English Movies 42 84% News 34 68% Cartoons 24 48% Tagalog Movies 21 42% Health 19 38% Business 16 32% Old Films (Local and Foreign) 15 30% Karaoke / Music Video Channel 14 28% Others: Sports 4 8% ABS TV+ offers Cine Mo! Channel which airs both local and foreign films, addressing the Top 1 and 4 preferences of the customers. DZMM Teleradyo delivers round the clock airing of news which will cater to the Top 2 demand, while Yey! Channel will cater to the Top 3 demand for cartoons, with Knowledge channel as an ad on for the kids as an educational form of entertainment. Although part of the traditional linear broadcasting, ABS TV+ would also cater for sports fanatics through the Studio 23 sports channel. Filipinos known to being music lovers which also reflected in the conducted survey having 28% or 14 out of 50 respondents wanting to have additional music channel, ABS TV+ is also including a child box in the roadmap which will serve as an accessory to enable videoke capabilities to cater for this specific market demand. The demand for local and foreign movies will further be complemented by USB accessories being considered in the pipeline for over-the-air (OTA) download of content that can be played using ABS TV+. Part of delivering full service to Filipinos, ABS TV+ offers 24/7 customer support for any issues or concerns they may encounter with TV+, even beyond its service warranty period. With a wide variety of products and services that ABS-CBN Corporation offers, the company keeps a 360-degree view of all the customers to further satisfy the needs of the Kapamilyas by offering customized cross-sell and upsell options. These options are based on the preferences and the consumers’ behavior to minimize unnecessary campaigns or offerings that do not match their needs. The product positioning for ABS TV+ will not only cater to B2C (Business to Customer) but also to B2B (Business to Business) as this same product can be used as partner channel. ABS TV+ box being distributed by ABS-CBN as well, gives it the flexibility of customizing and designing the traditional linear broadcasting channel and most especially the five additional channels to cater for other businesses’ advertising targets. ABS-CBN’s clients may opt for blocked advertising for specific channels, for targeted locations (buses, stores, shops, etc.) for targeted timeslots (morning, primetime, etc.).

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Price In the recent survey conducted by the team, 100% of the survey population are interested in experiencing cable-like quality in watching TV without having to pay for monthly subscription and are willing to change the antenna and buy a new device that will allow cable-like quality watching experience without the need for a monthly cable subscription. This is further strengthened by 70% or 35 out of 50 respondents who are willing to pay between Php500.00 to Php1,000.00 for a DTT device.

Php500 to Php1,000.00 35 70% Php1,000 to Php1,500.00 12 24% Php1,500 to Php2,000.00 2 4% Php2,000 to Php2,500.00 1 2% > Php2,500 0 0% Total Survey Population 50

This amount is very competitive as this is the same price range of an indoor/outdoor TV antenna. It is for the same amount that consumers may now experience cable-like audio and video quality without the burden of paying for monthly subscription. ABS-CBN do not intend to make the TV+ box as the bread-and-butter source of income, therefore, a high margin per device is not expected. Pricing of TV+ is very flexible and negotiable given that the major source of revenue is still driven by ad placement, anchoring on the strength of ABS-CBN’s content creation that can produce high viewership and high placement rates. Using Metcalfe’s law which is the concept of direct network externalities that illustrate the power that comes from its installed base or the number of users who have adopted a particular technology, ABS-CBN can further lessen the cost of TV+ for the base-of-the-pyramid market to build a high installed base. Higher installed base can then dictate higher price for partner channels to even out the cost. Promotion ABS-CBN being the biggest media conglomerate in the country have close to limitless marketing arm for promotion that it can tap to, both locally and globally. Although CME industry has been in a state of flux for the past years due to pervasive digital disruption, ABS-CBN has been prepared that its presence is unquestionable in all platforms available – traditional broadcast, print, radio, online and even in digital broadcast years before the government has decided on the standard to follow and the IRR still in work-in-progress phase.

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Aside from ABS-CBN’s core strength in content creation, another core competitive advantage of ABS-CBN is the wide variety yet complementing products and services with high upsell, cross-sell and bundling opportunities. Being a first mover in the introduction of Digital Terrestrial Television in the Philippines, ABS-CBN was able to start building its installed base without the need of selling TV+ boxes (aside from the fact that ABS-CBN is not allowed to sell TV+ just yet due to the unavailability of the government’s Implementing Rules and Regulations or IRR as of the moment). “TV+ seeding” as they call it was made possible by bundling this device with ABS-CBN mobile SIMs. Consumers can buy SIMs with free load and they can get the TV+ device for free. Therefore, several Filipino Kapamilyas has been experiencing and enjoying cable-like quality content for free for the past years. Using the Kano Concept, the one-dimensional quality of ABS-CBN TV+ is having a clear and good picture as well as sound quality. Over the decades, this has been the issue being encountered by consumers who cannot afford a monthly cable subscription. This too is one of the major challenges for ABS-CBN who is encountering poor signal outside Mega Manila, which in no way can the good content quality can easily compensate for. A clear and good picture and sound quality will cause an equivalent linear increase in satisfaction. This is also the reason why consumers who can afford monthly cable subscription would not burden themselves watching TV with antenna due to poor audio and video quality. A must-be quality on the other hand is the availability of all local channels that can be accessed using antenna. Having good audio and video quality would definitely cause a linear increase in satisfaction but the availability of all these channels must be a given,

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be it in good quality or not. Other must-be qualities are the compatibility to different brands of TV and availability of a remote control for the comfort of the consumers. One major attractive quality of ABS-CBN TV+ is the availability of five channels, offering five different genres of content. These are Cine Mo!, Yey!, Knowledge Channel, DZMM Teleradyo on top of the prominent linear broadcast that Channel 2 offers and the revamped Studio 23 offering Sports channel. In the survey conducted by the group, 52% or 26 out of 50 respondents are aware of Digital Terrestrial Television (DTT) while 48% or 24 out of 50 respondents haven’t heard of DTT and are not aware of what this new technology can offer. This may show a 52% low awareness, however, this also shows that ABS-CBN TV+ has already made a mark in the market even before its actual commercialization. Of the 26 respondents who are aware of Digital Terrestrial Television (DTT), below are the channels that they were exposed to about this new technology:

Friends / Family / Co-workers 16 62% TV, Radio and Print Ads 8 31% Internet Browsing 4 15% Social Media (Facebook, Twitter, etc.) 3 12% Others: Bus with installed DTT 2 8%

These data therefore further supports the effort of TV+ seeding campaign, giving away the TV+ for free prior its commercialization as it builds stronger installed base and uses the same pool of people, consumers as resources, in promoting the product to their respective networks. Place The vast marketing arm available for ABS-CBN in promoting TV+ also sets the perfect venue where the promotion can be delivered – ABS-CBN Merchandise store, ABS-CBN Mobile stores and kiosks, ABS-CBN remittance centers, ABS-CBN Regional offices all over the Philippines, dealers, and partners among others. Above all, the linear broadcast alone in Channel 2 can simultaneously reach all our Kapamilyas in the country. Using the strong influence of the brightest stars that ABS-CBN have, delivering the message to the consumers would not be that much of a challenge for a media conglomerate like ABS-CBN. The only thing that prevents it from doing so for the past years is the legal requirements pending from the government like the IRR. Venue where promotion can be done is no longer limited to physical locations

nowadays. With the buying power of consumers as they demand for more is enabled by the power of mobile internet connection. ABS-CBN online properties are additional channels where promotion can be done. Doing banner ads, push notifications and even pre-roll in iWanTV are just some

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among almost endless possibilities that online can offer. As reflected in the survey conducted by the group, 15% of our consumers were informed about ABS-CBN TV+ through ads while doing internet browsing while 12% were informed through social media like Facebook, Instagram, etc. Financial Projections

Assumptions Used:

• 105 Million PH Population • 20.2 Million Households • 14.2 Million Non-cable TV households nationwide • 70% Non-cable TV Households

Base Targets Per Year

Target'Per'DemographicsYear'2 Year'3

NCR$Population 2,759,829$$$$$$$$$$ Bicol$Region 1,111,753$$$$$$$$$$$$$$ Region$10$;$Northern$Mindanao 917,840$$$$$$$Region$3$;$Central$Luzon 2,239,011$$$$$$$$$$ MIMAROPA 602,131$$$$$$$$$$$$$$$$$$ Region$11$;$Davao$Region 1,011,943$$$$Calabarzon 2,833,595$$$$$$$$$$ Visayas 3,879,954$$$$$$$$$$$$$$ Region$12$;$SOCCKSARGEN 916,038$$$$$$$Total$Base$Per$Year$1 7,832,435$$$$$$$$$$ Total$Base$Per$Year$2 5,593,838$$$$$$$$$$$$$$ Total$Base$Per$Year$2 2,845,821$$$$

Total'Target'Base'(70%'non;cable)'for'Year'1 5,482,705''''''''''

Total'Target'Base'(70%'non;cable)'for'Year'2 3,915,687''''''''''''''

Total'Target'Base'(70%'non;cable)'for'Year'3 1,992,075''''

Year'1

Parameters Used:

Parameters Year)1 Year)2 Year)3Acquisition*Rate*Target*for*NCR 20% 30% 35%Acquisition*Rate*Target*for*Visayas 0 20% 25%Acquisition*Rate*Target*for*Mindanao 0 0 20%Retention*Rate*NCR 0 18% 20%Retention*Rate*Visayas 0 0 18%Retention*Rate*Mindanao 0 0 0%Cost*of*DTT*STB*(USD30.5*@*43*conversion) 1,300****************** 1,300***************** 1,300**************Cost*of*Sale*of*TV*Plus*(Add*10%) 1,400****************** 1,400***************** 1,400**************TV*Plus*Price 1,200****************** 1,200***************** 1,200**************Marketing*Expense*Per*Box 200********************** 200******************** 200******************Partner*Cost*of*Box 3500 3500 3500

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TV Plus Sales Volume Targets

Sales Volume Projection

TBD$Sales$Volume$Targets Year$1 Year$2 Year$3Partner$Sales 300,000$$$$$$$$$$$$$$ 500,000$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 1,500,000$$$$$$$$$$$$$$New$Acquisition$=$NCR 1,096,541$$$$$$$$$$ 1,644,811$$$$$$$$$$$$$$$$$$$$$$$$$ 1,918,947$$$$$$$$$$$$$$New$Acquisition$=$Visayas ,$$$$$$$$$$$$$$$$$$$$$$$ 783,137.32$$$$$$$$$$$$$$$$$$$$$$ 978,922$$$$$$$$$$$$$$$$$$New$Acquisition$=$Mindanao ,$$$$$$$$$$$$$$$$$$$$$$$ ,$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 398,415$$$$$$$$$$$$$$$$$$Retention$Target$NCR ,$$$$$$$$$$$$$$$$$$$$$$$ 197,377.36$$$$$$$$$$$$$$$$$$$$$$ 587,746$$$$$$$$$$$$$$$$$$Retention$Target$Visayas ,$$$$$$$$$$$$$$$$$$$$$$$ ,$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 422,965$$$$$$$$$$$$$$$$$$Retention$Target$Mindanao ,$$$$$$$$$$$$$$$$$$$$$$$ ,$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ,$$$$$$$$$$$$$$$$$$$$$$$$$$$Total$Customer$NCR 1,096,541$$$$$$$$$$ 1,842,189$$$$$$$$$$$$$$$$$$$$$$$$$ 2,506,692$$$$$$$$$$$$$$Total$Customer$Visayas =$$$$$$$$$$$$$$$$$$$$$$$ 783,137$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 1,401,887$$$$$$$$$$$$$$Total$Customer$Mindanao =$$$$$$$$$$$$$$$$$$$$$$$ =$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 398,415$$$$$$$$$$$$$$$$$$Total$Customer$Per$Year 1,396,541$$$$$$$$$$ 3,125,326$$$$$$$$$$$$$$$$$$$$$$$$$ 5,806,994$$$$$$$$$$$$$$Cost$per$Box 1,300$$$$$$$$$$$$$$$$$$ 1,300$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 1,300$$$$$$$$$$$$$$$$$$$$$$Revenue$from$STB$Sales 1,815,503,170$$ 4,062,923,842$$$$$$$$$$$$$$$$ 7,549,092,158$$$$$$Partner$Sales 750,000,000$$$$$ 1,250,000,000$$$$$$$$$$$$$$$$ 3,750,000,000$$$$$$Ad$Sharing$(Cross=bundle) 3,600,000$$$$$$$$$$ 3,600,000$$$$$$$$$$$$$$$$$$$$$$$$$ 3,600,000$$$$$$$$$$$$$$Direct$Ad$Placement 3,300,000$$$$$$$$$$ 3,300,000$$$$$$$$$$$$$$$$$$$$$$$$$ 3,300,000$$$$$$$$$$$$$$$=$Banner$Ads 3,000,000$$$$$$$$$$ 3,000,000$$$$$$$$$$$$$$$$$$$$$$$$$ 3,000,000$$$$$$$$$$$$$$$=$Side$bar 300,000$$$$$$$$$$$$$$ 300,000$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 300,000$$$$$$$$$$$$$$$$$$Total$Revenue$from$Ads 3,300,000$$$$$$$$$$ 3,300,000$$$$$$$$$$$$$$$$$$$$$$$$$ 3,300,000$$$$$$$$$$$$$$Total$SALES$Revenue$ 1,818,803,170$$ 4,066,223,842$$$$$$$$$$$$$$$$ 7,552,392,158$$$$$$

Sales&Volume&Projection Total&3&Years 2015 2016 2017

Sales&Volume ;&&&&&&&&&&&&&&&&&&&&&&&Partner&Sales 2,294,400&&&&&&&&&&&&&&& 300,000&&&&&&&&&&&&&& 494,400&&&&&&&&&&&&&& 1,500,000&&&&&&&&&&NCR 5,580,904&&&&&&&&&&&&&&& 1,232,023&&&&&&&&&& 1,842,189&&&&&&&&&& 2,506,692&&&&&&&&&&Visayas 2,185,024&&&&&&&&&&&&&&& 4&&&&&&&&&&&&&&&&&&&&&&& 783,137&&&&&&&&&&&&&& 1,401,887&&&&&&&&&&Mindanao 398,415&&&&&&&&&&&&&&&&&&& 4&&&&&&&&&&&&&&&&&&&&&&& ;&&&&&&&&&&&&&&&&&&&&&&& 398,415&&&&&&&&&&&&&&

Total&Sales&Volume 8,464,343&&&&&&&&&&&&&&& 1,532,023&&&&&&&&&& 2,625,326&&&&&&&&&& 4,306,994&&&&&&&&&&

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37!

3-Year Pro-forma Profit and Loss Statement

Sales&Revenue Total&3&Years 2015 2016 2017

Sales&Revenue&from&STB&Box&Sold <&&&&&&&&&&&&&&&&&&&&&&&Partner'Sales 8,030,400,000&&&&&&& 1,050,000,000&& 1,730,400,000&& 5,250,000,000&&NCR 8,796,637,310&&&&&&& 1,838,427,375&& 2,947,501,939&& 4,010,707,996&&Visayas 3,496,038,161&&&&&&& <&&&&&&&&&&&&&&&&&&&&&&& 1,253,019,712&& 2,243,018,449&&Mindanao 637,463,904&&&&&&&&&& <&&&&&&&&&&&&&&&&&&&&&&& <&&&&&&&&&&&&&&&&&&&&&&& 637,463,904&&&&&

Sales&Revenue&from&STB&Box&Sold 13,980,139,375&&&& 2,888,427,375&& 4,200,521,651&& 6,891,190,349&&

Sales&Revenue&from&AdsDirect'Ad'Placement 118,800,000&&&&&&&&&& 39,600,000&&&&&&&& 39,600,000&&&&&&&& 39,600,000&&&&&&&&Ad'Rev'Share'from'Cross'Bundle 129,600,000&&&&&&&&&& 43,200,000&&&&&&&& 43,200,000&&&&&&&& 43,200,000&&&&&&&&

Sales&Revenue&Ads 248,400,000&&&&&&&&&& 82,800,000&&&&&&&& 82,800,000&&&&&&&& 82,800,000&&&&&&&&Total&SALES&REVENUE 14,228,539,375&&&& 2,971,227,375&& 4,283,321,651&& 6,973,990,349&&

Cost&of&Sales ='''''''''''''''''''''''Cost'of'Box 11,850,079,938&&&& 2,144,831,938&& 3,675,456,445&& 6,029,791,555&&Marketing'Expense 1,692,868,563&&&&&&& 306,404,563&&&&& 525,065,206&&&&& 861,398,794&&&&&Total&Cost&of&Sales 12,156,484,500&&&& 2,451,236,500&& 3,675,456,445&& 6,029,791,555&&

Gross&Profit 2,072,054,875&&&&&&& 519,990,875&&&&& 607,865,206&&&&& 944,198,794&&&&&

Operating&CostsO/H'Cost 54,000,000&&&&&&&&&&&&& 18,000,000&&&&&&&& 18,000,000&&&&&&&& 18,000,000&&&&&&&&Depreciation'Cost'(Infra) 3,600,000&&&&&&&&&&&&&&& 1,200,000&&&&&&&&&& 1,200,000&&&&&&&&&& 1,200,000&&&&&&&&&&Depreciation'Cost'(SW'Build) 5,400,000&&&&&&&&&&&&&&& 1,800,000&&&&&&&&&& 1,800,000&&&&&&&&&& 1,800,000&&&&&&&&&&

Total&Operating&Expenses 63,000,000&&&&&&&&&&&&& 21,000,000&&&&&&&& 21,000,000&&&&&&&& 21,000,000&&&&&&&&

Net&Income&Before&Income&Tax 2,009,054,875&&&&&&& 498,990,875&&&&& 586,865,206&&&&& 923,198,794&&&&&Income'Tax 401,810,975'''''''''' 99,798,175'''''''' 117,373,041&&&&& 184,639,759&&&&&Net&Income&After&Taxes 1,607,243,900&&&&&&& 399,192,700&&&&& 469,492,165&&&&& 738,559,035&&&&&

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38!

Year 1 – Profit & Loss Statement

Year 2 – Profit & Loss Statement

Sales&Revenue 2015 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Sales&Revenue&from&STB&Box&SoldPartner'Sales 1,050,000,000&& 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000'''' 87,500,000''''NCR 1,838,427,375&& 55,202,400'''' 64,471,981'''' 102,848,439' 169,317,672' 169,317,672' 179,572,399' 178,266,211' 175,653,835' 178,066,916' 187,213,550' 187,213,550' 191,282,750'Visayas I&&&&&&&&&&&&&&&&&&&&&&& <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <'''''''''''''''''''Mindanao I&&&&&&&&&&&&&&&&&&&&&&& <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <''''''''''''''''''' <'''''''''''''''''''

Sales&Revenue&from&STB&Box&Sold 2,888,427,375&& 142,702,400& 151,971,981& 190,348,439& 256,817,672& 256,817,672& 267,072,399& 265,766,211& 263,153,835& 265,566,916& 274,713,550& 274,713,550& 278,782,750&

Sales&Revenue&from&AdsDirect'Ad'Placement 39,600,000&&&&&&&& 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000''''''Ad'Rev'Share'from'Cross'Bundle 43,200,000&&&&&&&& 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000''''''

Sales&Revenue&Ads 82,800,000&&&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&&Total&SALES&REVENUE 2,971,227,375&& 149,602,400& 158,871,981& 197,248,439& 263,717,672& 263,717,672& 273,972,399& 272,666,211& 270,053,835& 272,466,916& 281,613,550& 281,613,550& 285,682,750&

Cost&of&Sales <'''''''''''''''''''''''Cost'of'Box 2,144,831,938&& 64,402,800'''' 75,217,312'''' 119,989,845' 197,537,284' 197,537,284' 209,501,132' 207,977,246' 204,929,474' 207,744,735' 218,415,809' 218,415,809' 223,163,209'Marketing'Expense 306,404,563&&&&& 9,200,400'''''' 10,745,330'''' 17,141,406'''' 28,219,612'''' 28,219,612'''' 29,928,733'''' 29,711,035'''' 29,275,639'''' 29,677,819'''' 31,202,258'''' 31,202,258'''' 31,880,458''''Total&Cost&of&Sales 2,451,236,500&& 73,603,200&&&& 85,962,642&&&& 137,131,252& 225,756,895& 225,756,895& 239,429,865& 237,688,281& 234,205,113& 237,422,554& 249,618,067& 249,618,067& 255,043,667&

Gross&Profit 519,990,875&&&&& 75,999,200&&&& 72,909,340&&&& 60,117,187&&&& 37,960,776&&&& 37,960,776&&&& 34,542,534&&&& 34,977,930&&&& 35,848,722&&&& 35,044,361&&&& 31,995,483&&&& 31,995,483&&&& 30,639,083&&&&

Operating&CostsO/H'Cost 18,000,000&&&&&&&& 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000''''''Depreciation'Cost'(Infra) 1,200,000&&&&&&&&&& 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000''''''''''Depreciation'Cost'(SW'Build) 1,800,000&&&&&&&&&& 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000''''''''''

Total&Operating&Expenses 21,000,000&&&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&&

Net&Income&Before&Income&Tax 498,990,875&&&&& 74,249,200&&&& 71,159,340&&&& 58,367,187&&&& 36,210,776&&&& 36,210,776&&&& 32,792,534&&&& 33,227,930&&&& 34,098,722&&&& 33,294,361&&&& 30,245,483&&&& 30,245,483&&&& 28,889,083&&&&Income'Tax 99,798,175'''''''' 14,849,840'''' 14,231,868'''' 11,673,437'''' 7,242,155'''''' 7,242,155'''''' 6,558,507'''''' 6,645,586'''''' 6,819,744'''''' 6,658,872'''''' 6,049,097'''''' 6,049,097'''''' 5,777,817''''''Net&Income&After&Taxes 399,192,700&&&&& 59,399,360&&&& 56,927,472&&&& 46,693,750&&&& 28,968,621&&&& 28,968,621&&&& 26,234,027&&&& 26,582,344&&&& 27,278,977&&&& 26,635,489&&&& 24,196,387&&&& 24,196,387&&&& 23,111,267&&&&

Sales&Revenue 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sales&Revenue&from&STB&Box&Sold D&&&&&&&&&&&&&&&&&&&&&&&Partner'Sales 1,730,400,000&& 144,200,000' 144,200,000' 144,200,000' 144,200,000' 144,200,000' 144,200,000' 144,200,000' 144,200,000' 144,200,000' 144,200,000' 144,200,000' 144,200,000'NCR 2,947,501,939&& 245,625,162' 245,625,162' 245,625,162' 245,625,162' 245,625,162' 245,625,162' 245,625,162' 245,625,162' 245,625,162' 245,625,162' 245,625,162' 245,625,162'Visayas 1,253,019,712&& 104,418,309' 104,418,309' 104,418,309' 104,418,309' 104,418,309' 104,418,309' 104,418,309' 104,418,309' 104,418,309' 104,418,309' 104,418,309' 104,418,309'Mindanao D&&&&&&&&&&&&&&&&&&&&&&& >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >''''''''''''''''''' >'''''''''''''''''''

Sales&Revenue&from&STB&Box&Sold 4,200,521,651&& 350,043,471& 350,043,471& 350,043,471& 350,043,471& 350,043,471& 350,043,471& 350,043,471& 350,043,471& 350,043,471& 350,043,471& 350,043,471& 350,043,471&

Sales&Revenue&from&AdsDirect'Ad'Placement 39,600,000&&&&&&&& 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000''''''Ad'Rev'Share'from'Cross'Bundle 43,200,000&&&&&&&& 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000''''''

Sales&Revenue&Ads 82,800,000&&&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&&Total&SALES&REVENUE 4,283,321,651&& 356,943,471& 356,943,471& 356,943,471& 356,943,471& 356,943,471& 356,943,471& 356,943,471& 356,943,471& 356,943,471& 356,943,471& 356,943,471& 356,943,471&

Cost&of&SalesCost'of'Box 3,675,456,445&& 306,288,037' 306,288,037' 306,288,037' 306,288,037' 306,288,037' 306,288,037' 306,288,037' 306,288,037' 306,288,037' 306,288,037' 306,288,037' 306,288,037'Marketing'Expense 525,065,206&&&&& 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434'''' 43,755,434''''Total&Cost&of&Sales 3,675,456,445&& 306,288,037& 306,288,037& 306,288,037& 306,288,037& 306,288,037& 306,288,037& 306,288,037& 306,288,037& 306,288,037& 306,288,037& 306,288,037& 306,288,037&

Gross&Profit 607,865,206&&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&& 50,655,434&&&&

Operating&CostsO/H'Cost 18,000,000&&&&&&&& 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000''''''Depreciation'Cost'(Infra) 1,200,000&&&&&&&&&& 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000''''''''''Depreciation'Cost'(SW'Build) 1,800,000&&&&&&&&&& 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000''''''''''

Total&Operating&Expenses 21,000,000&&&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&&

Net&Income&Before&Income&Tax 586,865,206&&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&& 48,905,434&&&&Income'Tax 117,373,041&&&&& 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087'''''' 9,781,087''''''Net&Income&After&Taxes 469,492,165&&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&& 39,124,347&&&&

!

39!

Year 3 – Profit & Loss Statement

Sales&Revenue 2017 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sales&Revenue&from&STB&Box&SoldPartner'Sales 5,250,000,000&& 437,500,000''' 437,500,000' 437,500,000' 437,500,000' 437,500,000' 437,500,000' 437,500,000' 437,500,000' 437,500,000' 437,500,000' 437,500,000' 437,500,000'NCR 4,010,707,996&& 334,225,666''' 334,225,666' 334,225,666' 334,225,666' 334,225,666' 334,225,666' 334,225,666' 334,225,666' 334,225,666' 334,225,666' 334,225,666' 334,225,666'Visayas 2,243,018,449&& 186,918,204''' 186,918,204' 186,918,204' 186,918,204' 186,918,204' 186,918,204' 186,918,204' 186,918,204' 186,918,204' 186,918,204' 186,918,204' 186,918,204'Mindanao 637,463,904&&&&& 53,121,992''''' 53,121,992'''' 53,121,992'''' 53,121,992'''' 53,121,992'''' 53,121,992'''' 53,121,992'''' 53,121,992'''' 53,121,992'''' 53,121,992'''' 53,121,992'''' 53,121,992''''

Sales&Revenue&from&STB&Box&Sold 6,891,190,349&& 574,265,862&&& 574,265,862& 574,265,862& 574,265,862& 574,265,862& 574,265,862& 574,265,862& 574,265,862& 574,265,862& 574,265,862& 574,265,862& 574,265,862&

Sales&Revenue&from&AdsDirect'Ad'Placement 39,600,000&&&&&&&& 3,300,000'''''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000'''''' 3,300,000''''''Ad'Rev'Share'from'Cross'Bundle 43,200,000&&&&&&&& 3,600,000'''''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000'''''' 3,600,000''''''

Sales&Revenue&Ads 82,800,000&&&&&&&& 6,900,000&&&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&& 6,900,000&&&&&&Total&SALES&REVENUE 6,973,990,349&& 581,165,862&&& 581,165,862& 581,165,862& 581,165,862& 581,165,862& 581,165,862& 581,165,862& 581,165,862& 581,165,862& 581,165,862& 581,165,862& 581,165,862&

Cost&of&SalesCost'of'Box 6,029,791,555&& 502,482,630''' 502,482,630' 502,482,630' 502,482,630' 502,482,630' 502,482,630' 502,482,630' 502,482,630' 502,482,630' 502,482,630' 502,482,630' 502,482,630'Marketing'Expense 861,398,794&&&&& 71,783,233''''' 71,783,233'''' 71,783,233'''' 71,783,233'''' 71,783,233'''' 71,783,233'''' 71,783,233'''' 71,783,233'''' 71,783,233'''' 71,783,233'''' 71,783,233'''' 71,783,233''''Total&Cost&of&Sales 6,029,791,555&& 502,482,630&&& 502,482,630& 502,482,630& 502,482,630& 502,482,630& 502,482,630& 502,482,630& 502,482,630& 502,482,630& 502,482,630& 502,482,630& 502,482,630&

Gross&Profit 944,198,794&&&&& 78,683,233&&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&& 78,683,233&&&&

Operating&CostsO/H'Cost 18,000,000&&&&&&&& 1,500,000'''''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000'''''' 1,500,000''''''Depreciation'Cost'(Infra) 1,200,000&&&&&&&&&& 100,000''''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000'''''''''' 100,000''''''''''Depreciation'Cost'(SW'Build) 1,800,000&&&&&&&&&& 150,000''''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000'''''''''' 150,000''''''''''

Total&Operating&Expenses 21,000,000&&&&&&&& 1,750,000&&&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&& 1,750,000&&&&&&

Net&Income&Before&Income&Tax 923,198,794&&&&& 76,933,233&&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&& 76,933,233&&&&Income'Tax 184,639,759&&&&& 15,386,647''''' 15,386,647'''' 15,386,647'''' 15,386,647'''' 15,386,647'''' 15,386,647'''' 15,386,647'''' 15,386,647'''' 15,386,647'''' 15,386,647'''' 15,386,647'''' 15,386,647''''Net&Income&After&Taxes 738,559,035&&&&& 61,546,586&&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&& 61,546,586&&&&