CEO'S STATEMENT

Dear Shareholders, In a borderless and digital world, competition is increasingly relentless. In FY19, we initiated a strategic review of our business to reappraise our key imperatives, organisational structure and operations to remain efficient, agile and focused.

Henry Tan Poh Hock Chief Executive Officer

INTEGRATED ANNUAL REPORT 2019 13 CEO'S STATEMENT

Today, consumers live in an era of television, radio and digital platforms. In to ensure an optimal capital structure. In abundant choices. As a leading content and this new world, we recognise that customer FY19, we drew down on a new term loan consumer company that serves a rich and experience is a key differentiator, which is facility of RM380 million to enhance our diverse group of multiethnic, multicultural why it remains a priority that will help us existing funding pool while simultaneously and multilingual customers, it is essential navigate the changing landscape more prepaying RM629 million of our existing for us to have our finger on the pulse of effectively. term loan. In combination with FCF, these each segment and trend. Only then can we funding sources were used to fund capital maintain and grow our relevance among Resilient financial results and prudent expenditure (“Capex”) and provide a consumers. capital management return to shareholders. Capex amounted FY19 was a major sporting year featuring to RM386 million in FY19, invested mainly Having entertained Malaysia for well the 2018 FIFA World Cup, which resulted in the enhancement of technology stacks over two decades, we have shared much in higher content costs. Despite this and and deployment of connected Set-Top laughter, and many a tear and cheer with foreign exchange headwinds, our financials Boxes (“STBs”) with On Demand (“OD”) the nation. Our strength remains our reach remained resilient. Revenue was RM5.5 and Personal Video Recorder (“PVR”) of 5.7 million Malaysian homes serving billion, marginally down from the previous functionalities to deepen customer 23 million individuals, 16.2 million weekly year, and PATAMI was RM463 million, down engagement. At the end of FY19, our cash listeners on radio, 8.3 million average 40%. Our performance was underpinned by position stood at RM632 million, with our monthly unique visitors on our digital revenue diversification efforts alongside net debt/EBITDA level steady at 1.8 times. brands, and over 1.8 million registered disciplined cost management initiatives customers on Go Shop, our commerce across the entire business. Our business In line with our dividend policy of 75% platform. Our focus in FY20 is to strengthen remains highly cash generative with free payout of consolidated profits, in FY19 our core Pay-TV and NJOI businesses with cash flow (“FCF”) of RM1.3 billion, backed we rewarded shareholders with 9.0 sen of our key priorities being customers, content by sound capital management decisions. dividends per share, translating to 101% and customer experience. A differentiated of profits and a yield of 5.4%. We remain content offering of our own vernacular IPs, We retain flexibility in funding options by committed to our dividend promise, even Asian originals and live sports underpins constantly assessing market alternatives as we reinvest into our core and adjacent Astro’s ability to engage and persuade on businesses.

Enhancing our customer value proposition through content and broadband bundles

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Our On Demand content library caters to the shift in consumer viewing habits towards non-linear and OTT platforms

Market landscape is the default medium for short-form rewards initiatives; and strengthen our Broadband scene in Malaysia media consumption on-the-go, while customer value proposition amid the larger screens are mainly for longer-form industry upheaval. Through the new National Fiberisation and content. Providing a seamless viewing Connectivity Plan (“NFCP”), the government experience across devices at home and While we welcome healthy and legal aims to achieve 98% broadband penetration on-the-go is increasingly a key differentiator. competition, piracy remains the biggest of populated areas with an average speed Astro’s upcoming technology platform scourge of the industry. Asia Pacific of 30Mbps by 2023. The aspiration is to upgrade aims to address this by providing accounts for 44% of the worldwide Android halve broadband prices and double the content mobility and portability, unified STB market, the highest of any region in the speed to benefit consumers. The mandatory recommendations and consistent look and world. Malaysia accounts for the second standard access pricing (“MSAP”) under feel across STBs and smaller screens. largest share of content piracy in Southeast the NFCP unlocks opportunities for more Asia, after the Philippines. In 2017, the players to be part of the broadband value Acceleration of broadband connectivity Malaysian economy lost an estimated chain and provides consumers more will further fuel borderless competition. RM2.3 billion in revenue and induced varied and affordable broadband options. Global technology giants act as utilities spending, RM330 million in tax and over Liberalisation of the broadband sector or aggregators, leveraging their extensive 3,300 jobs as a result of piracy. We applaud opens new avenues for Astro to leverage ecosystems and more recently, content, MCMC for joining forces with the Asia Video our differentiated content for a compelling to lock consumers’ engagement across Industry Association (AVIA) and Coalition bundling solution for customers. different touchpoints. Major media Against Piracy (CAP) to raise awareness heavyweights are also starting to vie for on the damaging impact of digital piracy. Cheaper and faster broadband will eyeballs with their own direct-to-consumer We understand that MCMC is now looking accelerate the shift in how consumers OTT plays. To this end, Astro will continue to set up an agency to streamline multiple discover, access and consume content. to prioritise vernacular content creation to government agencies and industry players Today, the average Malaysian consumes drive engagement; form partnerships and to tackle content piracy more effectively. around 24 hours of video streaming a alliances with local, regional and global Astro supports these initiatives. week on mobile phones, tablets, laptops value-enhancing partners in the areas of and desktops. With mobile broadband content, broadband bundling and customer penetration at 110%, the smartphone

INTEGRATED ANNUAL REPORT 2019 15 CEO'S STATEMENT

Malaysia’s vibrant digital economy and Capitalising on the growth momentum, we premium content creator and integrated opportunities ahead are driving initiatives to expand our footprint marketing platform in Malaysia. As Malaysia becomes a digital nation, the in the OTT video, digital advertising and Malaysia Digital Economy Corporation e-commerce spaces. FY19 Key Highlights (“MDEC”) projects the digital economy to In FY19, we continued to expand our reach contribute to 20% of the country’s GDP by Investor sentiment across households, individuals, commerce and 2020, from 18.2% in 2016. Worldwide, a value disconnect exists advertising spaces by enriching our content between media incumbents and disruptors, and customer experience. A key component of a digital economy with capital markets applying differing is online video streaming. The Malaysian valuation standards. Investors value Customer and Experience online video subscription and advertising stable cash-generating companies based Winning over households and individuals market was valued at USD87.7 million in on FCFs but yet, simultaneously, display The strength of our combined Pay-TV and 2018, but is expected to grow by a CAGR little concern over the cash-generating NJOI segments has allowed us to increase of 21% over the next five years. Meanwhile, capabilities of digital-first corporations. our household penetration rate to 77%. Our digital advertising, the fastest growing NJOI segment continues to grow, driven by segment within the advertising market In recent months we have seen markets higher prepaid buys across more purchase locally, is expected to account for 33% of being more sensible in valuing these touchpoints. Our NJOI customers have total advertising revenues by 2023, up from digital-first companies, and their stock free access to 30 TV channels, including 19% in 2018. prices have since moderated. This may be free-to-air channels and three Go Shop attributed to cooling growth projections channels, increasing both our commerce E-commerce is also an important segment within the climate of slowing global growth, and advertising reach. Additionally, within Malaysia’s digital economy. With trade wars and political uncertainties; customers have the option to purchase 98% of Malaysian online users owning higher compliance costs arising from skinny bundles, à la carte channel offerings a smartphone and spending an average stricter scrutiny by regulators worldwide on and event passes on a prepaid mechanism, of 3.6 hours daily on mobile devices, it is anti-competitive behaviour and possible as we acclimatise customers to consume not surprising to find over half of them misuse of data; and increasing cost premium content and gear them towards an shopping online through their phones. structures to comply with local regulations upsell pathway onto our Pay-TV platform. It is estimated that 60% research their as governments contemplate taxes and potential purchases on social media prior other policies based on a digital, rather In FY19, Pay-TV ARPU was stable at to buying, ramping up social commerce. than physical, footprint. We see this as a RM99.9 with new customers’ incoming E-commerce contribution to GDP has more potential catalyst to narrow the valuation ARPU growing by 4% to RM70.6. We than doubled to RM86 billion in 2017 disconnect. Meanwhile, we will seek to surpassed the 1 million mark in the from 2010, recording an impressive CAGR capture new value, predicated on our number of Pay-TV connected boxes, of 13%. Through the implementation of customer relationships, brand trust, and showing a 25% year-on-year growth, and the National E-Commerce Strategic Plan, growing data and analytics capabilities driving OD downloads up by 135% to the government aims to increase this to by positioning ourselves as the leading 54 million videos in a year. By connecting to RM211 billion by 2020. WiFi, our connected customers have access to over 25,000 hours of content within our OD library that includes curated titles, box sets and premium titles, with algorithms tailoring recommendations based on viewing habits.

Our OTT, Astro GO and NJOI Now, complement our current big screen offerings, championing Astro as a ‘TV Everywhere’ proposition. As we continued to entertain our customers with high quality live streaming and OD content, the customised recommendation engine propelled growth of our Astro GO registered Go Shop offers a multiplatform shopping experience through its website and mobile app user base by 32% to 2.2 million.

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A strategic business review conducted connections with younger digital natives among customers accelerated through towards the end of 2018 highlighted how through fan engagement sessions on video, OD downloads and the growing base of the appetite to pay for digital services in web and social media platforms. registered OTT users. With the growing ASEAN remains small. As a result, we ceased popularity of local and regional content, we operations of Tribe, our regional OTT, Content: Our key differentiator are rebalancing content investments into and Tamago, our live streaming service in In FY19 we commissioned and produced these areas while we continue to aggregate favour of reinvesting in our core businesses. over 12,600 hours of content, bolstering the best of sports, live and international our position as Malaysia’s leading premium content. Over the medium term, we Solidifying commerce penetration content creator with an emphasis on local envisage a more equal split between local/ Alongside our three dedicated 24-hour vernacular IPs. We monetised our content regional and international/sports content channels in Malay and Mandarin, in FY19 through adex, commerce, on-ground spend. Go Shop introduced programming in events, merchandising and global licensing. English, Hokkien, Cantonese and Tamil, Several Astro IPs were licensed worldwide Based on our TV viewership share data, targeting promising new customer on Netflix for the first time, including our Astro customers watched twice as much segments. Its multiplatform reach via TV, movies Hantu Kak Limah and Paskal, as vernacular content versus other content. radio and digital that leveraged Astro’s well as Demon’s Path, our first Hong Kong This is also important to our adex proposition production capabilities and talents drove original mini-series which was also licensed which is premised on steady viewership growth in revenue and registered customers to Celestial. numbers and gives confidence to our clients of 29% to RM374 million, and 38% to to continue prioritising spends on Astro’s 1.8 million respectively. Our signature local content underpins the multiplatform offering. Our signature local growth in our overall viewership share across IPs and Astro-branded channels garnered Pivoting adex for the digital age both linear and non-linear mediums of OD consistently high viewership and they accounted for up to 70% of our TV adex. Malaysians enjoyed a tax holiday window and OTT. TV viewership share remained between June and August 2018 as the resilient at 75%, even as non-linear viewing tax regime reverted to SST from GST. This resulted in a contraction of Malaysia’s advertising industry by 2% in FY19 as advertisers held back on marketing spends, Hantu Kak given the natural demand emerging from Limah sets consumers during this period. As a major player in the advertising industry, we were a new GBO affected, with our TV and radex declining by 5% and 10% respectively in FY19. Our benchmark digidex grew 43%, outperforming the for local industry average of 20% as we ramped up our adex push across our growing digital movies, brands. beating Entertaining and delighting our fans with Hollywood great content across 11 leading radio brands has enabled us to retain our position blockbusters as the No. 1 radio network in Malaysia across all major languages with a radex market share of 76%, up three percentage points. Our overall radio footprint has grown as 16.2 million people listen to us weekly on terrestrial radio alongside 14.8 million average monthly digital streams. While our strong terrestrial radio presence remains essential to our multiplatform advertising proposition, our radio brands are transitioning to establish meaningful

INTEGRATED ANNUAL REPORT 2019 17 CEO'S STATEMENT

Local productions rivalling Hollywood’s Cinta Sepertimu, which have captured the catering to a global fan base. Didi & biggest franchises hearts of many customers over the years. Friends joins our other key kids animation Three of our movies broke local box office On the regional front, our local Hokkien IPs such as Cam & Leon, a comedy series, records, setting new benchmarks both entertainment offering Hua Hee Champion and Omar & Hana, a faith-inspired for ourselves and the Malaysian film is exported to Singapore and Taiwan while singalong, which are popular locally and industry. Released in the second half of Evening Edition continues to be the No. 1 overseas. the year, Hantu Kak Limah and Paskal Mandarin news programme locally for the beat major Hollywood blockbusters and fourth consecutive year. To further enrich our kids animation IPs, grossed in excess of RM30 million each we entered into a partnership with Les’ in the local box office. Polis Evo 2, our We deepened capabilities to serve Copaque to market and distribute Upin & action movie in collaboration with Emtek, vernacular online offerings to digital Ipin, and with SmartStudy to bring popular Indonesia’s top FTA, likewise garnered over natives. Our short-form content garnered characters Pinkfong and Baby Shark to RM20 million. Collectively, our six releases over 1.9 billion minutes watched on our Malaysia. led local movies’ GBO collection with over digital brands including Gempak, Ulagam RM100 million, capturing over 60% market and Xuan. Meanwhile, Astro AWANI was Major sporting year share. named the ‘Most Trusted Malaysian News 2018 was our biggest sporting year yet with Source’ in the Reuters Institute Digital News live coverage of the 2018 FIFA World Cup, Local is the new premium Report 2018. Winter Olympics, Commonwealth Games Our signature local offerings span genres and Asian Games. As the home of sports, Addressing the young from live shows, such as Maharaja Lawak we brought all 64 World Cup matches live Our signature kids animation IP, Didi & Mega 2018, Gegar Vaganza (Season 5) in HD to all sports fans. The World Cup saw Friends set new records this year, logging and Astro Classic Golden Melody, to news 11.6 million and 1.0 million unique viewers more than 1.4 billion YouTube views online. programmes on Astro AWANI and Evening on TV and OTT respectively, with 120,000 It also became our first kids IP to reach Edition, and highly anticipated dramas such World Cup passes sold. For the first time 100,000 YouTube subscribers in Indonesia, as Rahsia Hati Perempuan and Tak Ada ever, we extended our sports proposition and was dubbed into multiple languages, to all Malaysians, enabling them to stream

Our signature vernacular content continues to resonate with audiences on all platforms

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The Kuala Lumpur Major, an eSports tournament co-organised by eGG Network attracted thousands of Dota 2 fans by purchasing a World Cup pass via our attractive opportunities emerging. FY20 will Redefining our premium Pay-TV NJOI Now OTT. Football fans also rejoiced see us refocusing on our core business and proposition to hear we secured exclusive rights to leveraging our key assets, strengths and Enhancing customer experience the Premier League up to the end of the differentiators to solidify our position as As customer experience becomes an 2021/22 season. Malaysia’s leading content and consumer increasingly important differentiator, we will company. continue to adopt emerging technologies The rise of eSports to push for better customer experience. We will adopt a two-pronged approach, Astro has championed eSports since 2016 We intend to deploy cloud technology to with our Astro branded Pay-TV serving a as a means of engaging gaming millennials. deliver seamless viewing experiences to compelling bouquet of premium content eGG Network, our dedicated eSports individuals across TV, OD and Astro GO, for customers while NJOI will be positioned channel, is now present in eight countries, while also refreshing our user interface as a recruitment brand for us to expand our the latest being Indonesia. We chalked up and experience (“UI and UX”) across the reach across the remaining households in another first this year as we co-hosted the board. Initially slated for FY19, the launch Malaysia. We will continue to protect the inaugural Dota 2 tournament in Malaysia, of this new platform was deferred to FY20 premium Pay-TV segment while we grow The Kuala Lumpur Major. Featuring over as a result of extended negotiations for and monetise NJOI by featuring a freemium 100 professional gamers from around the better commercial terms with technology proposition with à la carte, skinny bundles, world, the event was a huge success, with providers. over 7,500 tickets sold and was the seventh sachets and event passes, with NJOI acting as a gateway for customers to full-fledged most watched eSports tournament globally Also planned is the commercial launch Pay-TV offerings. Our valuable customer in 2018. of 4K-Ultra High Definition (“UHD”) reach, alongside key enablers of data and service, following the introduction of talent, facilitates revenue diversification Looking ahead: FY20 the first 4K-UHD broadcast of Premier efforts by allowing us to expand beyond Amid the revolution happening within the League matches at selected commercial content to broadband, commerce, and content and connectivity spaces, we see establishments in FY19. adex.

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Elevating customer service privileges, ranging from special discounts, Refreshing content We are undertaking multiple initiatives access to lifestyle engagements, We will continue to create, curate and deliver to holistically enhance customer care and off-screen experiences and other benefits a rich variety of compelling content formats satisfaction, with a focus on improving negotiated exclusively for them in mind. to serve all segments in a very diverse service levels and ensuring a seamless and Our ability to reach, persuade and Malaysia across multiple genres, including hassle-free customer journey throughout promote puts us in a unique position to sports, movies, news and documentaries. their engagement with Astro. This initiative take on an intermediary role between This will be driven increasingly by Astro’s will encapsulate all customer touchpoints our partners and customers to achieve a own vernacular offerings, where we will across physical, voice and digital win-win proposition, providing partners place a special focus on Malay content engagements, allowing us to sharpen our access in return for preferential value to serve the largest and fastest growing competitive edge through better service. and benefits for our customers. Key for demographic segment in Malaysia, and us is to find a winning model that works Nusantara content to address the regional A key initiative in FY20 is the introduction for our business and customer base, one Malay-speaking diaspora. Efforts to export of our Astro Rewards loyalty programme. that is differentiated versus other reward our content verticals, especially kids, Islamic, Through Astro Rewards, our Pay-TV programmes in the market. eSports, and horror will also accelerate. customers will enjoy a host of exclusive Building on the success of our theatrical and original IPs in FY19, we intend to further enrich our content offering through Short-form partnerships with regional and global OTT players. On digital, we will strengthen our content on vernacular proposition, supported by our Gempak strong content library, reaching younger audiences through savvy use of social media is well- and digital brands to amplify awareness of received our content IPs among fans. by digital Seizing the broadband opportunity natives The liberalisation of the broadband sector arising from the change in government regulations and policies provides an opportunity for Astro to leverage our nationwide reach to integrate with the connectivity space. As a content provider, we are platform agnostic and open to partnering with any telco, whether through fixed or mobile broadband to deliver our content and services to customers. Broadband allows us to accelerate the rollout of our connected boxes into households to drive the non-linear, OD consumption that we champion. Indeed, the bundling of content with broadband has proven to be a successful strategy within developed markets, given how the two complement each other.

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We brought the first 4K-UHD broadcast of Premier League matches for sports fans in Malaysia

To date, we have established a new Reshaping advertising through a data Our market share across the TV, radio, partnership with a subsidiary of Tenaga driven marketing network digital and OTT spaces leaves us Nasional Berhad (“TNB”), alongside our On one hand, digital media allows well-positioned to be the most efficient and existing IPTV relationships with Maxis companies access to rich pools of effective marketing platform in the country, and TIME. While we continue to pursue monetisable data and analytics for better enabling our adex partners to tap into niche value-adding partnerships to expand our decision-making in both the business and markets and yield positive conversions. footprint as a broadband reseller, we are also exploring a more comprehensive marketing spheres. Our digitalisation efforts Leveraging our upcoming technology long-term plan to strategically venture into over the past few years have given us better the broadband space. understanding of our online audience, upgrade, we are looking to introduce a enabling our push into the digidex space. new addressable advertising solution Growing commerce in the second half of FY20, which will In FY20, we will continue to grow Go Shop On the other hand, there is no denying that allow different advertisements to be through a multiplatform and multilingual TV is still the most powerful medium to simultaneously served to segmentally approach by thoughtfully curating products persuade. However, the way it is researched, distinct individuals watching the same type for the needs of our diverse clientele. In measured and reported leaves much to be of content. line with the diversification of our product desired. We are exploring how to infuse the portfolios, we will experiment with new ‘intelligence’ of digital analytics with TV’s Nurturing talent content formats via multiple touchpoints unparalleled ‘emotional’ persuasive power. We are proud that Team Astro is as diverse and pursue collaborative partnerships to Combining these two powerful levers as our nation, underpinning our ability to strengthen Go Shop’s brand proposition. would enable us to create a truly impactful serve all communities. I would like to thank Underpinning our positive commerce multiplatform advertising experience that trajectory is Astro’s expanding ecosystem, Team Astro for their commitment and growing capabilities in data and analytics, moves beyond airtime sales and provides dedication in serving Malaysians. and core strength in on-screen talent and comprehensive solution-oriented offerings content production. to clients.

INTEGRATED ANNUAL REPORT 2019 21 CEO'S STATEMENT

Serving communities through our key pillars of Lifelong Learning, Community Development, Sports, and Environment

Arising from the need for a leaner Development, Sports, and Environment. In Closing organisational structure to enable fast As we continue to champion impactful By activating our substantial customer base decision-making and nimble execution, we programmes including the Astro Kasih and sustaining our leadership in vernacular initiated an ESS exercise towards the end Hostels, Kampus Astro and Astro Kem content, we aspire to be the preferred of FY19. Around 10% of our talents took Badminton, I am proud that Team Astro provider for entertainment, commerce up the ESS, trimming our talent base to remains committed, and contributed to such and connectivity. We are committed to over 4,600 upon completion of the ESS in initiatives. Meanwhile, our environmental elevating customer experience and service, February 2019. initiatives include the installation of solar enabled by technology, analytics and our panels on the rooftop of our headquarters talents. Partnerships will be key as we look As we streamline our workforce for agility to promote the use of renewable energy. for more efficient, mutually beneficial and efficiency, we are simultaneously means of collaboration. deploying strategic hires to new focus areas On the content front, our Astro Tutor TV including broadband, data analytics, digital channels air content tailored to mirror On behalf of Team Astro, I would like to and cloud computing. Internal transfers are the current school syllabus. We provide record my appreciation to Dato’ Rohana highly encouraged, and we provide learning, this service to students across Malaysia Rozhan for her leadership over the last upskilling and reskilling opportunities to through our Pay-TV, NJOI and OTT eight years. Thank you to all of Astro’s cultivate a diverse and fit-for-purpose talent platforms for free. Given our focus on stakeholders – our shareholders and base ready to execute our FY20 strategies. vernacular content creation, we emphasise regulators, our business partners, suppliers sourcing of local talent, providing and community, and foremost to our Emphasis on sustainability opportunities for them to develop and customers for your continuing support and flourish. On the commerce front, through The sustainability of our business hinges belief in us. It is you who motivate us to Go Shop, we feature and promote local on our ability to coexist with, complement reimagine the possibilities. and contribute to the community at products sourced from SMEs to boost large, anchored by the four identified key demand for domestic goods and spark a positive multiplier effect throughout the pillars of Lifelong Learning, Community Henry Tan local value chain. On behalf of Team Astro

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