Investing in the Digital TV Future 5th Annual TMT Conference
Barcelona, Spain 17th -18th November 2005 MEDIASET | Group in Brief
Profile One of the Largest media company in Europe and the leading free TV broadcaster in Italy. MS owns a 50.1% stake in Telecinco, the leading Spanish free TV broadcaster
Broadcasting Leadership in audience shares both in Italy and Spain : Commercial Target: 24h 45.1%, Prime Time 45.6%, #1 Broadcaster in Italy Commercial Target: 24h 25.2% , Prime Time 27.0%, #1 channel in Spain
Advertising Leadership in the TV Advertising market both in Italy and Spain : Market share 66.1% Italian TV Advertisin Market, #1 Broadcaster in Italy Market share 29.7% Spanish TV Advertisin Market, #1 Broadcaster in Spain
2004 Financials Total Net Revenues: 3,434.0 ml Euro 31.8% EBIT margin Net Profit: 549.6 ml Euro Dividend Paid in 2005: 448.8 ml Euro
Developments Leader and first mover in DTT business development in Italy First broadcaster to launch PPV Premium Content using prepaid cards First mover in the DVB-H business development
| 2 | | 2 | MEDIASET | Shareholders Geografical Breakdown
Floating Shares (57,16%) Mediaset Shareholders Geografical Breakdown
Others 5,5%
Retail UK MARKET 15,3% 7,9% 57,16% FININVEST 35.33%
Germany 1,7% CAPITAL RESEARCH France Usa 5,21% 2,8% BUYBACK Italy 13,3% 2,30% (at 11/11/2005) 10,7% Target 3,81%
Source: Consob, Company estimates on Shareholder Identification (July 2005)
| 3 | | 3| |3 | FOCUS ON CORE BUSINESS | Potential Structural Growth….
FTA Commercial TV: Structural Growth of the Italia ADV Market
Ad-spend UK = 1.14% Nominal GDP
UK Total ADV Market
Industry ITALIAN Total ADV Market Deregulation Privatisation Evolution
Ad-spend ITA = 0.64% Nominal GDP 2004
Digital Terrestrial TV: PPV Development
| 4 | | 4| |4 | FOCUS ON CORE BUSINESS | …..Assessing all Opportunity
TECHNOLOGICAL DEVELOPMENT GEOGRAFICAL EXPANSION
Rights Trading DTT (Pay/Free)DTT Mobile Tv (DVB-H) PubliEurope ADSL FTA Business Other digital platform DTT Business
Core Business
Cross Media Ownership Creativity/Content House
DTT switch off “date Teleshopping
VERTICAL INTEGRATION LEGAL FRAMEWORK
| 5 | | 5 | Broadcasting EUROPEAN OVERVIEW | Media coverage
% on Adults (2004) ITALY GERMANY SPAIN UK FRANCE
TV Daily reach 83.2 75.3 90.2 72.4 81.9
RADIO Daily reach 68.3 79.1 57.7 89.9 * 82.8
NEWSPAPER Issue reach 40.8 76.2 41.3 62.6 45.3
MAGAZINES Issue reach 66.7 93.8 54.2 77.1 96.8
CINEMA Weekly reach 5.0 4.5 8.8 6.1 6.7
* weekly
Source: European Marketing Book – Warc 2005
| 7 | | 7 | ITALIAN MEDIA SCENARIO | TV is the most powerful media
31.242 Coverage (.000)
5.576 6.197 5.437 2.899
TV RADIO WEEKLIES MONTHLIES DAILIES Canale 5 Radio Deejay Sorrisi e Focus Corriere Network Canzoni TV della Sera
Source: Auditel Year 2004 (adults 15+); Audiradio Year 2004 (adults 11+); Audipress 2004 (adults 14+)
| 8 | | 8 | ITALIAN MEDIA SCENARIO | TV is the most powerful media
2004 TOTAL TV OFFER
Total Audience (24 hours) 9.2 ml
TV Consumption (average daily viewing min.) 234 min.
Total Audience Trend, 24 Hours (.000) TV Consumption Trend, (min. per Day)
9.284 234 230 9.140 230 9.095 231 230 8.915 8.848
224 8.630
19992000 2001 2002 2003 2004 19992000 2001 2002 2003 2004
Source: Auditel (24 hours)
| 9 | | 9 | Broadcasting Italian Business MEDIASET | Leader on Commercial Target
9M2005 AUDIENCE CHANNELS (Commercial target 15-54)
47.1%
36.0%
2.4%
Local Channels Others Satellite DTT 14.5% Cable
Source: Auditel (24 hours)
| 11 | | 11 | MEDIASET | “3 Channels 1 Television”
24Hours - adults
60% Others SAT Total TV La7 50% Rete 4
40% Rai3 Italia 1
Composition men % Rai1 30% Rai2
20% Canale 5
10%
0% 40% 50% 60% 70% 80% Composition % Adults >35yrs Source: Auditel 2004
| 12 | | 12 | Advertising ADVERTISING EXPENDITURE IN EUROPE
Adv. Market in Europe Total Ad Spend as % of GDP per Media segment, 2004 (%)
1,31
1,19 8,4 8,7 16,6 16,9 1,25 1,14 1,14 1,13 31,5 35,6 48,8 1,01 37,5 38,9 0,95 35,7 0,89 0,91 0,88 0,81 0,82 0,76 0,75 56,0 0,71 0,76 45,9 44,2 0,67 0,73 42,5 0,70 0,65 32,8 0,62 0,61 0,64 0,63 0,65 0,6 0,60 0,60 Italy UK Germany Spain France 1999 2000 2001 2002 2003 2004 (*) UK Germany Spain France Italy TV Pr int Others
(*) Cinema not monitored
Source WARC, Advertising and Media Forecast, June 2005 Source: AC Nielsen, MMS, TNS, Infoadex net
| 14 | | 14 | ADVERTISING EXPENDITURE IN EUROPE
Total Adv. Expenditure in Europe TV Adv. Expenditure In Europe 2004 (€ ml.) 2004 (€ ml.)
18150 17410 6469 7723 5718 14167 4551
8122 2677 6058
Italy UK Germany Spain France Italy UK Germany Spain France
Source: Nielsen, MMS TNSofres, Infoadex; 2004, Total TV, Print, Radio, Outdoor and Cinema (except for Germany where cinema is not monitored) Source: Nielsen/Mms/TNSofres 2004
| 15 | | 15 | ADVERTISING EXPENDITURE IN EUROPE | CPT – Index 100
167
112 113
Index 100
68
Italy Spain UK France Germany
Source: Nielsen/Auditel; Infoadex/Sofres; DDS; ZAW/GFK – Irep/Mediametrie, Net advertising channel revenues, including agency commission, UK Pound/Euro exchange rate: 1 Euro = 0,68 - Target Adults - basis: 30” -
| 16 | | 16 | Advertising Italian Business 2005 8M | Italian Advertising Market
vs. previous year
Total Market +2.3%
Press +3.1%
-1.6% Radio
-3.5% Outdoor
TV +2.5%
+3.8%
-2.2%
Source: Nielsen AdEx estimates
| 18 | | 18 | MEDIASET 2005 9M | Publitalia Advertising Revenues
+3.7%
2,086.2 2,012.4
(€ml.)
9M2004 9M2005
| 19 | | 19 | MEDIASET | Last Advertising trend by Sector
2005 9M October 2005 9M 2005 (ml€) vs 2004 9M vs October 2004
+7.5% TELECOM 229.8 +16.5%
-2.0% AUTOMOTIVE 232.2 +4.5%
FINANCE/INSURANCE 85.6 +47.2% +109.4%
RETAIL 29.3 +23.7% +104.4%
FOOD 572.4 -3.9% -6.2%
NON FOOD 322.2 -2.9% -2.0%
| 20 | | 20 | Digital Terrestrial TV DTT Development in Italy | Coverage
Number of DTT Population multiplexes Coverage
2 mux 80% - ≃ 65%
2 mux >70%
1 + (1) mux ≃ 70% - (≃ 65%)
1 mux ≃ 68%
Sardinia and Valle d’Aosta should be the first Regions to switch off the Analog trasmission: already by the end of 1st Quarter 2006
(1) MUXs already Authorized but not yet Active
Digital Terrestrial TV
| 22 | | 22 | DTT Development in Italy | SET-TOP-BOX Penetration
Estimates of over 3.2ml Decoders at the end of October 2005 Around 2ml MHP Decoders sold with State subsidies 192.000 subsidies left to be reserved to Valle d’Aosta and Sardinia (switch off January 2006)
Profile of DTT STBs sold STBs Price History
€ 390 Subsidy 40% MHP STBs sold Net Price without subsidy € 150 Retail Price (gross of Sudsidy) € 250
€ 199 € 179 € 149 € 150 € 119 € 99 € 150 56% € 150 € 70 MHP STBs sold 4% with subsidy € 239 € 99 € 49 € 29 € 149 € 49 € 99 Zapper Jan 2004 Mar. 04 May 04 Sept 04 Dec 04 Apr 05 Today
Source: Estimate by GfK Marketing Services Italia, May 2005 Fonte: Stima GfK Marketing Services Italia Digital Terrestrial TV
| 23 | | 23| 23 | | DTT Development in Italy | Channel Offer
MainMain analogueanalogue channelschannels inin simulcastsimulcast SportSport andand sportsport newsnews
i i i i i SPORT
i i i SOLOCALCIO
News:News: financial,financial, international,…international,… KidsKids ShoppingShopping MusicMusic channelschannels
i i i
CinemaCinema newsnews PublicPublic serviceservice channelschannels ReligionReligion PayPay perper ViewView servicesservices
i i i i i
i Interactive Channels Note: “Rete A” multiplex is not included (broadcasting “All Music”, “The Club”, “Camera”, “Senato”) because its current coverage is below 50% Sources: DGTVi; Sat-Net; Booz Allen Hamilton analysis Digital Terrestrial TV
| 24 | | 24 | DTT Opportunity
Digital Terrestrial TV
| 25 | | 25| 25 | | DTT OPPORTUNITY | Mediaset Model
FREE-TO-AIR TELEVISION NETWORK OPERATOR PAY TV
Commercial TV Renting of Spectrum on Premium Content 3 generalistic channels proprietary Digital Terrestrial Access through: funded by advertising Transmitting Network to: Pay-per-View (Analog, DVB-T, DVB-H) Pay-per-Time Multichannel non-captive TV content Pay-per- Category Theme Channel funded by provider (DVB-T) (DVB-T, DVB-H) targeted advertising or mobile operators (DVB-H) telesales (DVB-T, DVB-H) Interactivity Interactive and Enhanced advertising Interactive services (DVB-T, DVB-H)
Digital Terrestrial TV
| 26 | | 26| 26 | | - Free-To-Air TV -
Digital Terrestrial TV
| 27 | | 27| 27 | | FTA TV | Enhanced TV Offer
Program Info “live” Entertainment Original language Games
Additional Tv Streams TV Guide (EPG)
Services/ Public Utility Commerce Interactive ADV Teletext
Digital Terrestrial TV
| 28 | | 28 | FTA TV | Multichannel, first FTA Kids Channel
Individuals - 24 Hours Kids (4 – 15) – 24 Hours
13.8%
2.1% 10.0%
1.7%
May 2005 October 2005 May 2005 October 2005
Source: Auditel Digital Terrestrial TV
| 29 | | 29 | FTA TV | Multichannel, Home Shopping Channel
MediaShopping
C5, I1, R4 Production and post Production Facilities Corner Windows Retailing and Marketing Customer Service Delivery and Logistics Direct 24h DTT 120 employed people Marketing Channel Around 1.000.000 clients 29% Revenues from Publitalia - Telesales Internet Catalogue - “60 spots From Jan. to Sept. 2005 (*): - 33.000 average sales per month - 80 euro, average revenue per Sale
(*) Canal D, analog FTA Terrestrial Channel with 65% coverage Digital Terrestrial TV
| 30 | | 30 | - Network Operator -
Digital Terrestrial TV
| 31 | | 31| 31 | | NETWORK OPERATOR | Digital Terrestrial Broadcasting
Digital Terrestrial Network
DVB-T DVB-H
Digital Terrestrial Set-Top-Box Mobile Handset, PDA, Portable TV
Open Platform Open Platform Limited Broadcasting Capacity Tv content can be broadcast in original format Ideal for FTA Broadcasting and DVD quality Channel multiplication Low power consumption for handset 2 MUX. already hosting 3rd party channels Needs only a small antenna
4 – 6 Mbps per channel 200 – 500 kbps per channel 4 – 6 channels per Multiplex 20 – 25 channels per Multiplex
Digital Terrestrial TV
| 32 | | 32 | NETWORK OPERATOR | Mobile TV, Possible Business Scheme
Content Aggregator Commercial Agreement Mobile Operators Broadcaster
Digital terrestrial Mobile Network Network
Broadcast Unicast & Free/PPV Tv Return on-demand Billing Content Path Content
End Users
Digital Terrestrial TV
| 33 | | 33 | NETWORK OPERATOR | Mediaset Agreements with Mobile Operators
Under a non-exclusive Commercial Agreement MEDIASET will provide Mobile Operators with:
Network Content
Free-to-Air Premium
Transmission Capacity 3 Generalistic Channels Mediaset “Serie A” on Mediaset DVB-H (from September 2006) matches Network (from September 2006) (from September 2006) European Champions League (from September 2006)
Digital Terrestrial TV
| 34 | | 34 | Pay-per-View – “MEDIASET PREMIUM”
Digital Terrestrial TV
| 35 | | 35| 35 | | PAY PER VIEW | First Pre-paid card Offer on TV
BENEFITS FOR VIEWERS BENEFITS FOR MEDIASET No dish required Focused Investments No Subscription Defensive Move “Pay for what you watch” Driver for DTT Penetration Clear and simple technology Additional Revenues
Credit recharged on the Card Credit used watching Mediaset Premium Content 4 1
Credit sent OTA Credit Purchased (Over the Air) to the STB 3 2 (on-line / off line)
Digital Terrestrial TV
| 36 | | 36| 36 | | PAY-PER-VIEW | New “Mediaset Premium” Card
Cards 2-size “Mediaset Premium” card: - 30 Euro (o/w 5 Euro plastic card) - 10 Euro (o/w 5 Euro plastic card), bundled with Set-Top-Box offer “Mediaset Premium Club”, for Commercial Premises (Pubs & Clubs) “Mediaset Premium” is available in 2.500 consumer electronic stores “Mediaset Premium” Cards will expire 30th June 2007
Credit Recharge 6 Credit size from 10 Euro to 100 Euro, Recharge fee from 10% to 0%, respectively Credits can be recharged through: - Credit Card calling Mediaset Premium Call Centre or connecting to Mediaset Premium Website - “Scratch Cards”, available in more than 80.000 point of sales: - Consumer electronics stores -Kiosk - In Lottomatica and Sisal sale points; recharge codes will be printed directly from terminals Credits have to be activated via a dedicated Call Centre or Website.
Digital Terrestrial TV
| 37 | | 37| 37 | | PAY PER VIEW | Live “Serie A” Offer
“SERIE A ’05/’06” - Mediaset Premium Offer
10 Teams 190 matches in a season 100 “Tier 1” matches (4 top Clubs) Juventus Milan Inter Roma Lazio 90 “Tier 2” matches 38 “DIRETTA PREMIUM” “SERIE A” season started 28th August 2005 Messina Livorno Siena Sampdoria Treviso Pricing 5 Euro per match 79 Euro, “Team Seasonal Ticket” + “Diretta Premium” 99 Euro, All Matches + “Diretta Premium”
760 Euro “Mediaset Premium Club”, All Matches + “Diretta Premium”
Digital Terrestrial TV
| 38 | | 38 | PAY PER VIEW | Movie Offer
Movies - Mediaset Premium Offer
4 Movies per day (Monday – Friday) 100 – 150 Titles in ’05/’06 season Movies are available with: Original Language Subtitles 5.1 Dolby Digital Audio PPV From 2 Euro (library) to 4 Euro (1st run on TV) First window Movie Offer started 28th August 2005 available on TV
Box Office 49126 24 months
DVD Sale DVD Rental PAY per VIEW PAY TV FTA TV
Digital Terrestrial TV
| 39 | | 39 | PAY PER VIEW | “Mediaset Premium” …. Coming up!
Reality Shows Concerts Fiction Comic shows Theatre plays Musical from September 2006: all UEFA Champions League matches Others … coming up!
Digital Terrestrial TV
| 40 | | 40 | MEDIASET PREMIUM | Update on PPV Take off
From 15th July 2005 to ….. 3Q 2005 31st October 2005
“Mediaset Premium” Smart Cards Sold to Retailers 1.232.000 1.335.000
N° Recharges sold to Retailers 699.000 861.000
“Cashed in” 49.2 ml Euro 55.0 ml Euro
PPV Revenues Recognized 6.8 ml Euro
Digital Terrestrial TV
| 41 | | 41| 41 | | MEDIASET | DTT Project Development
Mobile TV Business (DVB-H) PHASE 3 Pre-paid card and MHP Integration (2006) Introduction of other pre-paid funcions (Es. Pay per time)
o i Launch of new PPV Content (Reality, Movies, etc.) t PHASE 2 a Introduction of “Seasonal Ticket” or “Package Ticket” r (2H2005)
t
e Launch of Rechargeable cards
n
e
P
T PHASE 1 Launch of PPV Offer on a Key content (Soccer) T (1H2005) D Launch of a new theme channel (Boing) Launch of DTT Platform Creation of a Digital Terrestrial Infostructure
Digital Terrestrial TV
| 42 | | 42| 42 | | Financials MEDIASET GROUP | Leading Indicators
(€ml.) 1999 2000 2001 2002 2003 2004(4)
Ebit Margin (ROS)(1) (%) 28.1% 30.8% 26.1% 25.2% 28.0% 33.7%
Net Profit (€ml.) 339.2 423.5 248.4 362.0 369.7 549.6
Free Cash Flow(2) (€ml.) 370.5 255.0 123.9 219.8 282.9 448.7
Earnings per Share (€) 0.29 0.36 0.21 0.31 0.31 0.46
Dividend per Share (€) 0.18 0.24 0.21 0.21 0.23 0.38
Distributed Dividend (€ml.) 216.2 283.2 247.8 247.4 271.7 448.9
Pay-out Ratio (%) 64% 67% 67%(3) 68% 74% 81.7%(5)
(1): Italian TV Operations (2): Italian Business, excluding Associates Investments and Tele5 Dividend (3): excluding Kirch Media extraordinary provisions (4): IAS/IFRS (5): 89.7% before IAS/IFRS
| 44 | | 44 | MEDIASET | Use of Cash: FCF vs Dividends (FCF from Core Activities; IAS/IFRS from 2004)
448,7 448,9
370,5 FCF Dividend
283,2 282,9 271,3 255 247,8 247,4 216,2 219,8
123,9
1999 2000 2001 2002 2003 2004 2005
| 45 | | 45 | Investing in the Digital TV Future 5th Annual TMT Conference
Barcelona, Spain 17th -18th November 2005