2Q (July –September 2008) FY 2009 Teleconference: October 21st, 2008

Zee Entertainment Enterprises Limited Quarter Two Earnings Conference Call – Financial Year 2008-2009 October 21, 2008

Moderator: Good afternoon ladies and gentlemen. I am Sandhya, the moderator for this conference. Welcome to the Zee Entertainment Enterprises Limited Quarter Two FY 2009 results conference call. For the duration of the presentation, all participants’ lines will be in the listen-only mode. After the presentation, the question and answer session will be conducted for participants connected to WebEx International. After that, the question and answer session will be conducted for participants in India. Now, I would like to hand over to Mr. Harshdeep Chhabra. Thank you and over to you sir.

Mr. Harshdeep Chhabra: Thank you. Ladies and gentlemen, thank you for joining us today to discuss the results for the quarter ended September 30, 2008, which is the second quarter for the financial year 2009. We do hope that you had a chance to go through copies of the earnings release and results which are uploaded on our website www.zeetelevsion.com. This is the second earnings call we are conducting for Zee Entertainment Enterprises Limited for financial year 2009 and to discuss the results and performance joining me today is Mr. Subhash Chandra, Chairman, Zee Entertainment Enterprises Limited and members of senior management team of the company including Mr. Punit Goenka, Whole Time Director and CEO ZEEL; Mr. Sanjay Jain, CFO Essel Group; Mr. Hitesh Vakil, Director, Finance, ZEEL; Mr. R. Nanda Kumar, President, Corporate Communications Essel Group. We will start with a brief statement from Mr. Punit Goenka on the second quarter performance and then we will open the discussion for question and answers. I would like to remind everyone that anything that we say during this call that refers to our outlook for the future with a forward looking statement that must be taken in the context of the risk that we face. With this, I now request Mr. Punit Goenka, Whole-time Director and CEO Zee Entertainment Enterprises Limited to address the audience.

Mr. Punit Goenka: Thank you Harsh. Firstly I would like to welcome everybody to this call and appreciate your joining for the discussion on the results for the second quarter of financial year 2009. I am pleased to announce that we have recorded a robust 43% growth in operating revenues which is led by advertising revenue growth of 30% and subscription revenue growth of 38%. Even in this prevailing macro economic environment and the given escalating competition in TV broadcasting arena, the company continues to dominate the television viewership across its footprint, which has led to this handsome revenue growth. We continue to focus on revenue leadership even as our channels surge ahead on the viewership front across countries. Zee is poised to deliver the business outlook committed to its shareholders and this belief is supported

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through the breadth of our portfolio, a clear vision for maximizing revenues across our various businesses and a strong focus on risk return parameters. I would now like to discuss in detail some of the key financials of the second quarter of financial year 2009 versus financial year 2008, which would give a clearer picture of our second quarter performance. Advertisement revenue was Rs. 2.85 billion for the quarter ended 30th September 2008, an increase of 30% compared to the corresponding period last fiscal. Our advertisement revenues have yet again been ahead of the industry growth rates, reiterating the belief that advertisers will still prefer television as a medium given its current cost effectiveness. The subscription revenue was Rs. 2.24 billion for the quarter ended 30th September 2008, an increase of 38% as compared to the corresponding quarter of last fiscal. Other sales and services stood at Rs. 621 million, a 273% growth compared to the corresponding quarter last fiscal. This includes new revenue streams of Rs. 117 million from our film division, Zee Entertainment Studios, which released five films across four languages during this quarter. Other revenue streams under this head include syndication sales, education business, playout and production services, events, and commission on advertising and subscription sales. Consolidated revenues stood at Rs. 5.71 billion for the quarter representing a 43% growth over the corresponding period in the previous fiscal. Programming and operating cost has increased by 57%. This includes start up cost of Zee Next and Zee Entertainment Studios, as well as cost incurred on incremental hours of original content programming for Zee TV, higher cost of movie rights and cost of the India-Sri Lanka cricket series on Ten Sports, all of which has amounted to Rs. 1.15 billion. Excluding the impact of these initiatives of the cost on a like-to-like basis, the average inflationary increase in operating cost has just been 7.5%. During the current quarter, personnel cost has gone up by 52% to Rs. 513 million from Rs. 338 million over the corresponding quarter last fiscal. Personnel cost in this quarter includes proportionate quarterly provision for financial 2009 performance incentive of Rs. 60 million to be paid in the next year. This is over and above the performance incentive of Rs. 290 million paid in May 2008 for the performance of last fiscal year. If we remove the impact of these additional provisions, then net increase in personnel cost stands at 33% for quarter two of current year over quarter two of last year. Operating profit for the current quarter has gone up by 12% to Rs. 1.42 billion from Rs. 1.27 billion last year corresponding quarter. Operating margins stood at 25% for the quarter, but if we remove the impact of losses the sports business incurred due to the India-Sri Lanka cricket series, operating margins stood at 34%. During the quarter, interest and other financial losses of 223 million including foreign exchange derivative loss of Rs. 111 million were incurred. During this period, Asia Today Limited, a wholly owned subsidiary of the company, received a refund of Rs. 789 million from the income tax department for the assessment years 2001 through 2004. The Appellate Authorities

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of Income Tax Department have held that the foreign telecasting company Asia Today Limited is operating through independent agents in India and hence has no permanent establishment under articles 5 and 7 of double taxation avoidance treaty between India and Mauritius. Accordingly, its revenues from India are not taxable in India and hence excess tax provisions for earlier years have been written back during the current quarter. During the current quarter, company provided for 489 million towards tax provision, as a result profit before tax increased by 5% to Rs. 1.48 billion while profit after tax went up by 84% to Rs. 1.78 billion for the quarter of financial year 2009. I would now like to cover some of the business performances. For the flagship channel Zee TV, our focus on week days, weekend prime time, as also the afternoon offering has yielded satisfactory results. Even in the wake of heightened competitions, the channel has retained its viewership base and reach. The channel averaged 219 weekly GRPs attaining a 20% market share and maintained the performance of 19 out of 50 talk programs in its genre. Saat Phere, Dulhan, Maayka, Kasam Se were the top rated shows on the channel this quarter. New programs such as Sa Re Ga Ma Pa, Ranvir Rano, Ek Se Badkar Ek, Waaris have been well received. The channel continues to focus on its core fiction programming with interesting twists within existing story lines, exciting new shows and block buster films. Zee Next, a newly launched channel has capped losses at rupees 82 million for the quarter. Whilst the revised strategy is being formulated for the channel, it has been currently brought under maintenance mode and spends similar to those incurred in second quarter of financial year 2009 are expected across the remainder of this financial year. Cumulative loss during first half of the year for this channel has been rupees 480 million. Zee Cinema continues to lead in the Hindi cinema genre. We have 33% market share, key properties such as Shanivaar Ki Raat, Bhakti ki Shakti etc., continue to deliver high ratings on this channel. The channel has procured various block buster movies and undertaken various marketing activities which have helped strengthen the brand connect with audiences across markets. In the English GEC Space, Zee Café, got a 23% channel share and ranked second in the genre on viewership. Shows such as Everybody Hates Chris, Crosswords, I wanna be a Soapstar are amongst the few that have helped it reach this position. The channel is highly appreciated by its relevant target group. Zee Sports and Ten Sports saw high volume of sports action this quarter and garnered 65% market share making them a leader in their genre genre. Prominent sporting events including coverage of the Indian cricket team’s tour of Sri Lanka, the US open tennis tournament, the Ryder Cup golf tournament, and I- league football were some of the properties showcased in this quarter. Going forward, the channels would cover the Indian cricket league on Ten Sports and Zee Sports. Ten Sports would continue with its WWE programming while Zee Sports would continue with coverage of the I-league as well as the newly formatted Federation cup football tournament. The sports

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business revenues during the second quarter of financial year 2009 were rupees 1.3 billion recording a growth of 212% over the corresponding quarter last fiscal. However the EBITA for the second quarter of financial year 2008 stood under negative of rupees 85 million in comparison to negative of rupees 12 million during the corresponding quarter last year. During the quarter the film business under the new started division Zee Entertainment Studios has registered revenues of Rs. 117 million and operating profits of 31 million getting at an operating margin of 27% in the quarter 2 of current year. As a part of structuring the movie production business, the company has formed various direct and indirect fully owned subsidiaries during this quarter. The company also proposes to eventually transfer its existing movie library to its wholly owned subsidiary Zee Entertainment Studios. We look forward for the rest of the year with optimism and assure that we will continue to deliver more value to the viewers and the stakeholders. Thank you very much and now I would like to open the floor.

Mr. Harshdeep Chhabra: Ladies and Gentleman we are ready for your questions now. I would request all participants to kindly limit themselves to 2 questions each so that we can get as many people as possible.

Moderator: Thank you. We will now begin the Q&A interactive session for India participants. First question comes from Mr. Ritesh Poladia from Dolat Capital. Over to you sir.

Mr. Ritesh Poladia: Good afternoon sir, I have a question on sports revenue. Of the 130 crores if you can bifurcate what would be the contribution of advertisement and subscription?

Mr. Subhash Chandra: Ritesh, we don’t share product wise data.

Mr. Ritesh Poladia: Very true sir. Sir the reason for asking my question was if I remove this 130 crores of revenue and if I see the like-to-like performance, then the revenue growth is just 12%, so is it that the other properties are not contributing like the sports is contributing.

Mr. Punit Goenka: You know that the test cricket and the ODIs are also attracting lower viewership and thereby lower advertising revenues.

Mr. Subhash Chandra: It is now the 20-twenty game, India Cricket League.

Mr. Ritesh Poladia: Sir like our total advertisement plus subscription is 224 plus 285, if I remove 130 crores, then the YOY performance of the main channel that is Zee Cinema and Zee Entertainment, the growth is at 12%.

Mr. Subhash Chandra: I don’t think that’s the right way to do it.

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Mr Hitesh Vakil: You can read through our earning release in which we have given very specifically what is the revenue and profitability with Sports and without Sports.

Mr. Ritesh Poladia: Okay sir, I will get that one.

Mr. Punit Goenka: I will repeat to you immediately that without Sports, the total revenue was 4.421 billion, total expense is 2.913 billion, Operating profit is 1.508 billion, that is 34%.

Mr. Ritesh Poladia: Thank you sir.

Moderator: Thank you very much sir. Next in line we have Ms. Fathima from ICICI Prudential.

Ms. Fathima: Sir, if you could give me bifurcation of the cost that you told 115 crores in a programming which is said as additional, could we get a sense because the entire cost that you pay for acquiring any movie rights are to amortized over a long time right, so you would not charge it to your P&L ASAP right?

Mr Hitesh Vakil: As Punit said, the like-to-like basis, the programming cost increases only 7.5%.

Ms. Fathima: Sir you are moving similar component whatsoever than the second quarter last year.

Mr. Subhash Chandra: Yeah, we have added new movie business, so there is programming cost for the movies, the sports business, things of that kind.

Ms. Fathima: Okay. Sir secondly regarding the other sales and services of 62 crores, sir sequentially also that is an increase of over around 15 crores, sir would that largely is syndication revenues.

Mr. Punit Goenka: Syndication revenues also, we have started the division, which is doing the space selling business of advertising for third party channels and also the movie business has been added in to that.

Ms. Fathima: Yeah like our business, I think more or less sequentially it is flat because I think you made 11 crores in the first quarter.

Mr. Punit Goenka: Yes that is correct, but there is, as I have mentioned in my presentation, it is coming from commission of advertising and subscription sales and the syndication revenues, syndication of contracts.

Ms. Fathima: Okay. Sir thirdly regarding a DTH revenue, I think your DTH revenue was 27 crores right, so could you tell us how many subscribers you are getting paid for.

Mr. Hitesh Vakil: Sorry, we don’t share that figure.

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Ms. Fathima: Yeah the only thing is that I guess it should be below expectations for even the company right because I think the space of addition in the second quarter was very strong.

Mr. Subhash Chandra: We are giving you 38% growth on subscription revenues and sequentially also we are giving you growth.

Ms. Fathima: Yeah, sir, administrative and other costs are also up significantly sir sequentially, sir any particular reason for that, sir if we write off our bad debts in that segment right.

Mr. Hitesh Vakil: There is no write off as explained in the page, personnel cost has gone up by additional provision from about 6 crores rupees and similarly there has been a placement cost which has been implemented over last year in same quarter and resulted into annual growth.

Ms. Fathima: So would we say what I have to pay is some sort of carriage fee for Zee TV.

Mr. Hitesh Vakil: It is for the entire bouquet of channels. There is nothing specific for one channel.

Ms. Fathima: Okay, but the charge has gone up.

Mr. Punit Goenka: Yes.

Ms. Fathima: Okay sir. Thank you sir, I will get back if I want more questions. Thanks.

Moderator: Thank you very much ma’am. Next question comes from Mr. Abhneesh Roy from Edelweiss. Over to you sir.

Mr. Abhneesh Roy: Yes, I had a question on your sports business. You said most of the increase in the programming cost has been due to the India-Sri Lanka cricket tournament and we have made a loss also in that business. What exactly is the strategy in the sports business is it in the investment phase or the India-Sri Lanka cricket series was as per our expectations.

Mr. Punit Goenka: As Chairman mentioned just sometime ago that with the advent of the twenty-twenty games that have gone up, the viewership on one day and test matches have definitely taken a huge toll. Now the good part is that for us we do not have that much very expensive cricket with us. I do not think we will have losses on a consolidated annual basis. We will still be making profit in sports on the annual calendar.

Mr. Abhneesh Roy: Okay. Sir, coming to the ad revenue front, recently talk has been that some slowdown is being expected Q4 onwards. So what exactly will be our strategy for Zee Entertainment channels. Will inventory utilization be the main focus in the slowdown period.

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Mr. Punit Goenka: Well we cannot discuss the strategies on this call Abhneesh, but basically our focus is not on inventory. We focus on yield. That is what our focus is on always.

Mr. Abhneesh Roy: So are we seeing a significant slowdown because we are more dependent on the FMCG category in which not much slowdown is being expected, so what is the sense in the coming quarters.

Mr. Subhash Chandra: We assume that this year overall advertising revenue is 30% growth. But we see from now onwards about 5% slowdown in the overall ad markets.

Mr. Abhneesh Roy: Okay. Sir, coming to Sa Re Ga Ma reality show, is it performing as per our expectation, and obviously due to fragmentation and so many me-too shows of similar nature, are we also thinking on a new format reality show. Any thinking on that lines sir?

Mr. Subhash Chandra: We cannot really discuss the programming strategies in public. One thing is very clear, with our experience of 16 to 17 years in the business, from which I think we are uniquely positioned. We would roll out our programming strategy in a structured way rather than just reacting to competition’s high cost programming.

Mr. Abhneesh Roy: Yes. Okay. That is all from my side. Thanks sir.

Moderator: Thank you very much sir. Question comes from Mr. Amit Kumar from Kotak Securities. Over to you sir.

Mr. Amit Kumar: Thank you very much. I just wanted to understand, I think Fatima has already asked this, but on the DTH revenue side the incremental quarter on quarter has been about 8%, but what we are seeing in the market is that you know, if you look at Dish TV, Tata Sky, and Big TV also launched this quarter, the incremental increase even on a quarter on quarter has been almost 20 to 25%, I mean, very strong incremental additions.

Mr. Subhash Chandra: They have not yet been billed.

Mr. Amit Kumar: Okay, is this some kind of a discount that you are providing for the first couple of months or…

Mr. Subhash Chandra: When I am saying we have not billed yet, where is the discount Amit Kumar.

Mr. Amit Kumar: No, I just do not understand sir. If they are offering your channels as part of their service, and they have added to schedules for the last one and a half months.

Mr. Subhash Chandra: Yes, when they will give us their statement that there are so many subscribers, then we will bill them, then they will pay us, then we will credit to our account. We have not yet billed Big TV in this quarter.

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Mr. Amit Kumar: So, can you please help me understand whether this billing will happen on a quarter basis, I mean, what will be the billing period.

Mr. Punit Goenka: Those are contractual details we negotiate.

Mr. Hitesh Vakil: Billing period is monthly, collections are dependent on the subscriber numbers reported to the broadcasters by the operator. There is about a 2 months delay in reporting these numbers.

Mr. Amit Kumar: Okay sir. I just wanted to understand a bit on the subsidiary financial side as well. If we compare your consolidated and standalone financials, your subsidiary has made a decent amount of profit. This was the case in the last quarter as well. Your subsidiaries have made a decent amount of profit, but your minority interest is not reflecting that. I just wanted to understand, you know, which are the subsidiaries which have contributed to the increase in profits versus last year. Which are the subsidiaries which are kind of you now, where the profitability has come down.

Mr. Hitesh Vakil: Amit, there are 3 entities in which minority interest is captured, that is Zee Turner, ETC, and Ten Sports. Rest of the international subsidiaries are fully owned subsidiaries.

Mr. Amit Kumar: They are 100% owned?

Mr. Hitesh Vakil: Yes.

Mr. Amit Kumar: Okay so out of these, ETC, Turner, and Sports, which is the subsidiary which has essentially you know, the profitability has declined substantially. Ten Sports I am assuming is one of them but…

Mr. Hitesh Vakil: We have reported in this quarter sports business has declined, has a negative EBITA, so it is rather obvious

Mr. Amit Kumar: Okay sir, not a problem, thank you so much.

Moderator: Thank you very much sir. Next question comes from Mr. Ritesh from First Global. Over to you sir.

Mr. Ritesh: Sir, I just wanted to understand, like your press release said, selling expenses have increased 65% which mostly includes placement charges. So, this placement charges are area charges only.

Mr. Hitesh Vakil: It is mainly placement charges, there is definitely other selling and promotional cost.

Mr. Ritesh: Sir, I did not understand what is this placement charges, is it carriage charges?

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Mr. Hitesh Vakil: Carriage fees.

Mr. Ritesh: Okay sir, and one more question, you have also launched a Tamil channel, Zee Tamil? Is Zee Tamil under Zee or is it under some subsidiary.

Mr. Punit Goenka: It is under Zee News Limited.

Mr. Ritesh: Zee News Limited, okay fine. Thank you sir.

Moderator: Thank you very much sir. Next question comes from Mr. Sharad from Edelweiss Research. Over to you sir.

Mr. Sharad: Good afternoon sir. We have seen that programming cost in the quarter has gone up to 45.7% of revenues from 41.6% in the previous year, same quarter which I understand is primarily due to the cricket program but even though that it is a one off thing, and it wont be there in the next quarter going forward, how much do you think would be the increase in the programming spending due to new hours added, or broadly what would be the programming expenditure going forward?

Mr. Hitesh Vakil: We have given guidance on our total revenue and EBITA. This is too specific a question.

Mr. Subhash Chandra: We are within our guidance, there is nothing new which we need to report to the investor community beyond what we have done in the beginning of the year. The number of hours of increase on Zee TV and other things have been taken into account in our budget exercise which we did. We will remain within that.

Mr. Sharad: Okay, like you said that they are on a like to like basis, your programming costs have gone up only 7.5%, can you please tell us, on a like to like basis how much of ad revenue has gone up.

Mr. Hitesh Vakil: You are asking the same question that how much is the revenue attributed to the sports business with the breakup. This has been mentioned in the earnings release.

Mr. Sharad: Okay, sir the last question. What we have seen is that there is a gap in the GEC space and the type of content which is rolling out, because there is clear lack of appetite for reality shows and other K serials which have been going on for the past couple of years, so what is your strategy going forward. I believe Zee is launching 3 programs over the next couple of months, so how do we plan to get back the GRPs we have lost.

Mr. Punit Goenka: That is precisely what you just said, rejuvenating our existing content and launching new shows.

Mr. Sharad: Okay, but there is nothing specific which can be shared?

Mr. Punit Goenka: No. Difficult for us to share specific shows.

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Mr. Sharad: Okay fine sir, thank you.

Moderator: Thank you very much sir. Next question comes from Mr. Venugopal from Credit Suisse. Over to you sir.

Mr. Venugopal: Hello. Thanks for taking my question. On the tax side, I just wanted to check do we have any further amounts expected to be captured in earnings over the next couple of quarter or this is the final amount.

Mr. Subhash Chandra: As and when we get these we will report them. Such things cannot be provided for.

Mr. Venugopal: Secondly on the movie business, currently how much of our capital is committed to movies at this juncture and any update on the AIM listing for the movie business.

Mr. Subhash Chandra: No we do not have any updates to report, but we have so far committed about 100 crores to this movie business

Mr. Venugopal: Okay thanks a lot.

Moderator: Thank you very much sir. Next question comes from Mr. Nainesh Rajani from Tata Mutual Fund. Over to you sir.

Mr. Nainesh Rajani: Good evening sir, just a couple of questions. I want to know and understand on a quarter-on-quarter basis we have not seen a major increase as far as ads revenues and subscriptions revenue is concerned. I am talking purely on quarter-to- quarter basis. I just wanted to understand your sense with competition increasing what is it that we plan to do differently. First of all what is it that we plan to do additionally to capture that market share. Second on account of that, are we seeing any pressure on our ad revenues from our customer key clients.

Mr. Subhash Chandra: I think we are going down the wrong direction if we look at this business sequentially because there is always higher advertising revenue in the second half of the year. So comparing sequentially is wrong. As it is the stock markets, every week you are watching the rating and buying and selling, but that is for the market to decide, not for us to decide, but that is probably wrong.

Mr. Nainesh Rajani: But are you seeing that happening sir, based on your GRPs, your ad revenues, fluctuations in your ad revenues, are you actually seeing.

Mr. Subhash Chandra: The advertising rates do not fluctuate that way things happen in the way stock market which is now buying and selling on the weekly ratings.

Mr. Nainesh Rajani: Okay so you have not seen that up until now.

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Mr. Subhash Chandra: But we definitely feel that there would be impact on the advertising revenues which will come probably. Everybody starts thinking and cutting back, tightening their belts, but we do feel there would be new categories of advertisers those who come. We do feel that we will be able to deliver what we have promised to them.

Mr. Nainesh Rajani: Okay sir that is it from my end and thanks a lot sir.

Moderator: Thank you very much sir. Next question comes from Mr. Bijal from IIFL Capital. Over to you sir.

Mr. Bijal Shah: This is Bijal from IIFL. I had a couple of questions. First, if you can just quantify what is the amount of content cost we have paid for India – Sri Lanka series which is recognized during the quarter.

Mr. Hitesh Vakil: Sorry we cannot give propertywise details.

Mr. Bijal Shah: Okay, secondly I just wanted to understand that you said that there is an increase in original programming hours. So, what were they on the main channel last quarter and what were they in the previous quarter. We have seen original hours increasing primarily on other channels rather than Zee TV main.

Mr. Subhash Chandra: I think that data is actually wrong. Quarter-on-quarter number of hours on Zee TV itself has also been going up.

Mr. Bijal Shah: Yes, how much they have gone up by?

Mr. Subhash Chandra: About an hour a day.

Mr. Bijal Shah: An hour a day, okay. How much increase we see in the coming quarter?

Mr. Subhash Chandra: We have yet to increase within this year additional one and half hours.

Mr. Bijal Shah: Okay thanks.

Moderator: Thank you very much sir. Next question comes from Mr. Ruchit from HSBC. Over to you sir.

Mr. Ruchit Mehta: Yes, hi, good afternoon and congratulations on your result. Just to understand from a structural perspective, is cost of doing business actually increasing considering the amount of money the competition is spending.

Mr. Subhash Chandra: It could have, but we are still not doing on a knee-jerk reaction. We are still maintaining our calm and cool. But, yes, it could have increased and I think some of our other competitors have taken acost increase.

Mr. Ruchit Mehta: Okay great, thank you so much.

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Moderator: Thank you very much sir. Next question comes from Mr. Jameel Ansari from Nomura Securities. Over to you sir.

Mr. Jameel Ansari: Yes, hi, good evening everyone. Sir, I just want to check whether we are still on track with plans to hive off Zee Next or is there any change in plan?

Mr. Subhash Chandra: No, we are on plan.

Mr. Jameel Ansari: Okay and any deadline as to by what time we can see that through?

Mr. Subhash Chandra: I do not think anybody has that answer my dear. As and when the markets improve we will have to do that. Wait for improving the markets.

Mr. Jameel Ansari: Okay and just one thing sir, I mean the new DTH players have still not started contributing to your DTH revenues right, I mean Reliance

Mr. Subhash Chandra: Not in this quarter but you will see the impact in next quarter.

Mr. Jameel Ansari: Okay fine, thanks a lot sir.

Moderator: Thank you very much sir. Question comes from Mr. Anand from SBI Mutual Fund. Over to you sir.

Mr. Anand: Yes, hi, congrats for reporting higher set of numbers and specifically on the rating points for Q2 ‘09, the quarter just gone by, the prime time rating average have fallen 20 to 25% as per time data. Even then there is a very impressive ad revenue growth of 30%. Is it that there is a lag in ratings to reflect in ad revenue and until and unless the ratings improve from hereon, there would be pressure on advertisement income.

Mr. Subhash Chandra: No there is no fall from Q1 to Q2.

Mr. Anand: No, I am referring to this file of prime time rating points, if you see the average, then for Q2, it shows the average, there is a decline YOY for the second quarter 2009 over second quarter 2008. Would that be incorrect data?

Mr. Subhash Chandra: You are comparing one year before.

Mr. Punit Goenka: Yes, but that will not be 22%, I think.

Mr. Anand: Yes, maybe, I am just trying to understand here that is there a lag and in case I understand…

Mr. Subhash Chandra: There is always a lag as I was telling Anand before you came on the line. It is the stock market which reacts to the ratings very quickly, the advertising industry does not. On the other hand also, Zee as a network is not dependent on a single channel.

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The market looks at only Zee TV which probably is 20% of the overall advertising revenue for the network. So even if there is a 5% to 10% impact which we may see temporarily during this quarter, coming quarter on Zee, that may have only 2% overall impact overall of the network and which we will make up, more than make up perhaps from somewhere else.

Mr. Anand: So this means even if the ratings remain where they are, which I am sure they will improve given the renewed effort on programming hours and on movies, but even if they remain where they are, you will be able to report growth in Q3, I mean, that would be management expectations.

Mr. Subhash Chandra: We will. As I said that first quarter if you look at, first quarter we gave almost 40% growth. This time it is 30% growth, but in fourth quarters average we are committed for 30% growth.

Mr. Anand: Sure, good luck sir. Thank you.

Mr. Punit Goenka: Thank you.

Moderator: Thank you very much sir. Next question comes from Mr. Ram Patnaik from Religare Securities.

Mr. Ram Patnaik: Good afternoon sir, this is regarding Zee Entertainment Studio. You said that in the current quarter they have released 5 films. These are produced films or distributed. What are they, I mean, can you just throw some light on that please?

Mr. Punit Goenka: 3+2, 3 produced, 2 released.

Mr. Ram Patnaik: All Hindi films sir?

Male Speaker: 2 regional, 3 Hindi out of 5.

Mr. Ram Patnaik: Alright, thank you.

Moderator: Thank you very much sir. Next question comes from Ms. Tanu from Quantum Asset Management. Over to you ma’am.

Ms. Tanu: Sir, can you tell us the debtors days consolidated for the 6 months’ period as on September 30th.

Mr. Hitesh Vakil: 118 days.

Interruption in call/Call Dropped

Moderator: Next question is from Mr. Vikas from ICICI Securities.

Mr. Vikas: Good afternoon sir, Vikas here. Just a feeler on the international subscription revenues which on a sequential quarter basis has been close to flat, is it because of the currency effect that we are seeing or there has been a decline in the domestic collections.

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Mr. Hitesh Vakil: We are yet to see the impact of dollar appreciation. We are taking average daily rate and accordingly we value it at around Rs. 42, as against the closing rate of about Rs. 48 today.

Mr. Vikas: Okay haven’t these sports properties in the last quarter led to a bump up because we would expect that generally whenever there is a sports property.

Mr. Hitesh Vakil: It does not change the subscription revenue in that sense.

Mr. Vikas: Okay. On the other sales and service where you are reporting 62 crores of revenue, does that also account for the ad selling that we do for Zee News.

Mr. Punit Goenka: Yes, it does.

Mr. Vikas: Okay thank you sir.

Moderator: Thank you very much sir. Next in line we have Mr. Gyanesh from Quantum Asset Management. Over to you sir.

Mr. Gyanesh: Just want to know the situation on the data side on the subscription revenues. Usually against the backdrop of a situation where many of these DTH companies have been bleeding and how is the situation on that debtor side and going forward what kind of a strategy you are looking at for collecting your dues from this segment in a timely manner.

Mr. Hitesh Vakil: As an industry, subscription debtors are on an average pay at around 90 to 120 days. That is the benchmark. It can vary from customer to customer; particularly this has been a problem of analog subscriptions. DTH subscription is not so much of a problem at this moment. There is a problem on reporting which is delayed by about 2 to 3 months.

Mr. Gyanesh: But do you see like any problem with the DTH going forward, I mean, being in a cash strapped situation probably which they might be getting to in the next 6 months or so.

Mr. Hitesh Vakil: We have not seen it so far.

Mr. Gyanesh: Okay. Got your point, thanks.

Moderator: Next question comes from Ms. Praveen from Jet Age. Over to you ma’am.

Ms. Praveen: Good evening sir, I just wanted to understand what isthe accounting policy for accepting of sports rights.

Mr. Hitesh Vakil: Cost of sports rights for each event is depreciated the moment it goes on air.

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Ms. Praveen: Okay sir, for instance if we have taken rights for say 3 years, then it will be expensed over 3 years?

Mr. Hitesh Vakil: Yes.

Ms. Praveen: Okay, secondly sir, I just wanted to understand placement fee, how do you see placement fee move going forward? Are we expected to see this kind of a quarter-on-quarter rise or is it going to stabilize at some level?

Mr. Subhash Chandra: I think there might be, we do not see this going too much up. This is a one-off kind of scenario where the new comers have thrown money and with the result we have to pay a little bit more.

Ms. Praveen: Okay. Okay, thank you sir.

Moderator: Thank you very much sir. Next question comes from Mr. Raunak from Valley Quest Research. Over to you sir.

Mr. Raunak: I just want to know regarding your buy back plans. You had some plans of buy back you cancelled. So any possibility of going for a buy back plan again.

Mr. Subhash Chandra: No. Not really.

Mr. Raunak: Sir, actually I just want to know about your FCCB issues. So can you give me a bit of an idea about it?

Mr. Hitesh Vakil: Well, large portion of it is converted already. A very small fraction is still pending and outstanding which will get over by March 2009.

Mr. Raunak: Okay, sir and what is your total debt at current levels.

Mr. Hitesh Vakil: At current levels, debt level is about 458.

Mr. Raunak: Okay thank you sir.

Moderator: Thank you very much sir. Question is from Mr. Dhiren from Business Standard. Over to you sir.

Mr. Dhiren: Yes, good evening gentlemen. Congratulations for the good set of numbers. You know, I joined a little late so my question might come as a repetition but Zee TV has lost the number 2 spot in the GEC genre to Colors for the week number 40 and 41 as well. We have been seeing, since the time Colors has entered, we have been losing share to them, so you know, what our strategy is going forward to get back the market share and even enhance it further.

Mr. Subhash Chandra: Well, we read your story in your newspaper, but this is early days for us to react to that situation. It is only 2 weeks and I do not think one can determine 2 weeks as lost position.

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Mr. Punit Goenka: We have our programming strategy in place. We are not doing any knee-jerk reactions. We will be rolling out our content with the expectation that we will get our viewers back and they will come back.

Mr. Dhiren: Okay, thank you.

Moderator: Thank you very much. Next in line we have a followup question from Mr. Ram Patnaik from Religare Securities.

Mr. Ram Patnaik: Sir, I just wanted to understand this, can you just please name these 3 Hindi films that you have release sir, by way of production or distribution?

Mr. Hitesh Vakil: Galgale Nighale of Marathi and Takkar of Bengali, and Ugly Pagli, Hancock and Chamku were in Hindi.

Mr. Dhiren: Okay sir. Thank you.

Moderator: Thank you very much sir. Next in line we have Mr. Miten from HDFC. Over to you sir.

Mr. Miten: Good evening sir, thanks for the opportunity. Just back calculating from what you said in your opening remarks, is it that the loss in the India – Sri Lanka series would be the order of 12 to 13 crores.

Mr. Hitesh Vakil: We have said 85 million is the total loss from the sports business.

Mr. Miten: Now that is the total operating loss on the sports business, but particularly the India – Sri Lanka series.

Mr. Hitesh Vakil: That is what we are not giving at this moment, we cannot share product-wise returns.

Mr. Miten: Okay. The second thing that I wanted to ask was we mentioned that our like to like programming cost is 7.5% increase YOY. The number of hours of fixed programming has also increased by one hour per day. Is that the kind of increase that we can make do with, with even further fresh programming increase or do you think going forward that increase will be of a bigger order.

Mr. Subhash Chandra: Miten, the way you should look at, that per hour of original programming, per hour cost of original programming has gone up 7.5% on last year. Then plus you will have to add one hour additional which we have added and you will have to add another one and a half hours which we will go up by up to 31st March of this year.

Mr. Miten: Okay and lastly someone did mention it, but is it fair to assume that the international subscription revenue will receive the

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rupee depreciation benefit in the next quarter to come or that is not how we should look at the next quarter international subscription revenues.

Mr. Hitesh Vakil: There will definitely be an impact as daily average rate will keep on improving, to that extent there will be an impact.

Mr. Miten: Okay and sir, one last one, it is too early to comment probably on FY10, but if we retain our current ratings into next year, what sort of an advertising growth should one be looking at for FY10.

Mr. Subhash Chandra: We cannot retain the current ratings. Either we will go up in rating or we will creep down. The ratings cannot remain static. I wish if that was the case then we would go on top and then we will stay there. It does not work this way, but hopefully we will increase our ratings for FY10, but it is early to talk.

Mr. Miten: What I was trying to assess was that are you now already seeing signs of you know, overall ad budgets being cut across the board and that sort of a thing for FY10 or that is only today in the newspapers and not in reality happening.

Mr. Punit Goenka: I do not think we have started seeing major cuts in advertising spends even for this fiscal yet. People are still talking about it, so I think it is still early days to assess what will be the potential cut if any for the next fiscal advertising budget.

Mr. Subhash Chandra: All broadcasters will all be together in it, it is not applicable to only Zee as a company.

Mr. Miten: True sir, just trying to assess whether there is a slowdown or a dip in budgets, overall budgets or something of that sort that you are already seeing.

Mr. Subhash Chandra: Initially it is early to get these kind of questions, because we get questions every week that what is rating going down, going up. You are already asking for the next year. That is good, keep it up. Tell some of your colleagues also to have a long term view.

Mr. Miten: Thanks sir.

Mr. Punit Goenka: Thank you.

Moderator: Thank you very much sir. Next question comes from Mr. Vikas from ICICI. Over to you sir.

Mr. Vikas: Sir, I just wanted to check back on 2 things, we mentioned that our flagship channel just accounts for 20% or plus advertising revenue, so that would mean out of the 1100 crores this year, we do close to 220 crores out of Zee TV flagship and on the tax

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write back, have we mentioned that this amount was due anywhere in our balance sheet last year.

Mr. Subhash Chandra: What I was saying was that 20% is just off the cuff number I am giving you. Everybody when they see that only Zee TVs rating has fallen or have gone up, they should not be overtly happy or overtly worried about. What I am saying is that Zee being a company as a whole is multi-legged, multi-product company. Only from that point of view, you should look at it.

Mr. Vikas: Okay, thank you sir.

Mr. Punit Goenka: Thank you Vikas.

Moderator: Last question comes from Mr. Rohit from B&K Securities. Over to you sir.

Mr. Rohit: Hi sir, good evening, this is Rohit here. I just wanted to understand the revenue sharing between the ICL and Zee Sports, and Ten Sports.

Mr. Punit Goenka: It is being broadcasted on cash neutral impact basis to Zee.

Mr. Rohit: And Zee will not be booking any costs as well accordingly.

Mr. Punit Goenka: Zee will book ad revenue and pass it on to ICL which will be at cost. That is why it is cash neutral.

Mr. Subhash Chandra: Subscription revenue is to Zee’s account as a profit.

Mr. Rohit: Right sir. Okay thanks a lot sir, that is all from my side.

Moderator: Thank you very much sir. At this moment I would like to handover the floor to Mr. Harshdeep Chhabra for the final remarks.

Mr. Harshdeep Chhabra: Thank you all for joining us. We will soon have the transcript of the call on our website at www.zeetelevision.com. We look forward to speaking to you again at the end of quarter three of this financial year or even earlier on a one-to-one basis. Thank you and have a great day.

Moderator: Thank you very much sir. Ladies and gentlemen, thank you for choosing WebEx Conferencing Service. That concludes this conference call. Thank you for your participation.

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