CTC Media boosted by Russian digital delay

The full launch delay of Russia’s second digital TV multiplex from 2015 to 2019 will add billions of rubles to the cash flow of Russia’s CTC Media over the coming years.

Announcing its second quarter earnings, CTC Media said that it has been actively engaged in the discussions about the timing of the second Russian TV digital multiplex, resulting in the postponement of the full launch by four years. Multiplexes house groups of broadcast networks over different frequencies.

“This will significantly reduce our expenditures over the next five years, and we now expect the inclusion of CTC and Domashny channels in the second multiplex to cost us up to 185 million rubles net of VAT in 2014, compared to the previous forecast of almost 900 million rubles [US$25.2 million],” said CTC Media CEO Yuliana Slashcheva.

CTC said that this will result in the optimisation of up to five billion rubles of operating costs, with this contributing more than four billion rubles to the firm’s cash flow by 2019.

Russia’s second multiplex will start to broadcast in cities with populations over 50,000 in the second half of 2014, rolling out to cities with populations of over 10,000 between 2015 and 2018. The complete infrastructure will be in place in 2019.
“The revised schedules of the digitisation program and the payments from the participants of the second multiplex to Russian Television and Radio Broadcasting Network will balance the interests of the state and broadcasters, and will contribute to stable development of the industry,” said CTC Media’s COO, Sergey Petrov.

“The new program implementation schedule will improve the economy of media businesses while enabling a phased roll-out of nationwide digital broadcasting infrastructure.”

Elsewhere in its earnings, CTC said that the audience shares of its core Russian channels were influenced by a shift of focus towards news broadcasts on Ukraine, the Sochi Winter Olympics and the FIFA World Cup.

“These events increased the overall TV viewership, helping us offset the reduction in audience shares and monetise our advertising inventory to a large extent,” said Slashcheva.

CTC said that its recently launched female-skewing CTC Love channel has already reached 25% national penetration and is expected to bring in US$1 million in ad revenues in its first year.

The firm also said that after striking a deal with Hulu in Q2 to distribute four series through the US web TV site, it is now “evaluating further expansion opportunities” for its international distribution, and is currently “negotiating with other video platforms and aggregators in the US and Europe.”

Overall in the quarter, CTC Media’s operating revenues were down 1% in ruble terms and 11% in dollar terms to US$184 million – impacted by the year-on-year devaluation of the ruble. Net income was down 6% in rubles and 16% in dollars to US$26.7 million.