17, 2006 Annual TMT Conference

At the forefront of Russian
broadcast entertainment
Annual TMT Conference
November 15 -17, 2006
Disclaimer
„
The information contained in this presentation, including market data that are attributed to specific sources, have not been independently
verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness,
accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its or their
affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from
any use of this presentation or its contents or otherwise arising in connection with the presentation.
„
The presentation is not an offer of securities for sale in the United States. Neither the presentation nor any copy of it may be taken or
transmitted into or distributed in the United States of America or to any U.S. person within the meaning of Regulation S under the United
States Securities Act of 1933, as amended (the “Securities Act”).
„
Any offer of securities to the public that may be deemed to be made pursuant to this communication in any EEA Member State that has
implemented Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the “Prospectus
Directive”) is only addressed to qualified investors in that Member State within the meaning of the Prospectus Directive.
„
This presentation is not a public offer or advertisement of securities in the Russian Federation, and is not an offer, or an invitation to make
offers, to purchase any securities in the Russian Federation.
„
This presentation contains certain “forward-looking” statements, including statements regarding the Company, its business plans,
performance, and other matters that are not historical facts concerning its business operations, financial condition and results of
operations. These forward-looking statements typically contain words such as “ intends,” “expects,” “anticipates,” “estimates,” “aim,”
“believe,” “assume,” “should,” and words of similar meaning, which are predictions of or indicate future events or future trends. Forwardlooking statements in this presentation may include statements about the development of the CTC Network and Domashny Network in
terms of audience share, numbers of independent affiliates, increased technical penetration and programming expenditures; the
expansion of the Television Station Groups, including the acquisition of new owned-and-operated stations, the development and
successful tender for new television frequencies and the installation of additional unmanned repeater transmitters; the impact on the
Company’s results of operations of the proposed law on advertising that, if enacted, would reduce the amount of advertising permitted on
television; the development and structure of the television advertising market in Russia; the Company’s cash needs; the implementation
of the Company’s corporate strategy; and the Company’s financial performance. These forward-looking statements speak only as at the
date as of which they are made, and none of the Company, the Selling Shareholders or any of its or their respective agents, employees or
advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained
herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on
which any such statements are based.
2
Russia – one of the Largest Markets in Europe
Population1:
143 mm
Land Area1:
17 mm sq. km
GDP (PPP)1:
$1,584 bln
Ad market2:
$5.0 bln
TV Ad Market2:
$2.3 bln
Fifth largest economy and sixth largest ad market in Europe
Note:
(1)
(2)
Source: World Factbook, 2005
Source: Russian Association of Communication Agencies, 2005
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The CTC Media Group
Two satellites covering all 11
time zones
Four feeds for each TV
channel
CTC Network: over 100 mm viewers; over 320
affiliates, including 17 O&Os and 19 repeaters
Domashny Network: over 58 mm viewers; over 190
affiliates, including 6 O&Os and 7 repeaters
23 owned and operated stations
in larger cities
Two channels structured along US network broadcasting model
4
TV Station Groups
TV Networks
The CTC Media Group
A nationwide TV Network reaching
approximately 70% of the Russian
population (1) (c.100 mln people)
Over 320 affiliates
17 TV stations in Russia’s larger cities
A nationwide TV Network reaching
approximately 40% of the Russian
population (1) (c. 58 mln people)
Over 190 affiliates
6 TV stations in Russia’s larger cities
Combined audience share of 11.3%, market share of 13.6% in 2005
Note:
(1)
Equal to 143 millions, World Factbook, 2005
5
Significant Advertising Growth Potential
Significant Growth Potential for Ad Spend
400
UK
Ad spend per capita, US$, 2005
350
Germany
300
250
Hungary
France
200
Spain
Italy
Czech Rep
150
100
Poland
50
Russia
0
0
5
10
15
20
25
30
35
40
GDP per capita, US$’000, 2005
Source: ZenithOptimedia, December 2005
Significant growth potential for ad spend even relative to current GDP
6
Attractive Growth Fundamentals for TV
2005 Cost per Thousand (CPT) in US$
2005 Cost per Thousand (CPT) in US$
12.9
11.2
8.2
6.4
5.5
3.5
1.9
1.0
1.0
TV
Magazines
Newspapers
Source: Initiative Futures Worldwide, November 2005
Radio
Russia
Poland
Czech
Republic
Germany
USA
Source: Initiative Futures Worldwide, November 2005
TV remains inexpensive relative to other media and other markets
7
TV Advertising Market
2005 Russian Ad Market
TV as per cent of Total Ad Market
Other
1%
Outdoor
19%
65%
61%
50%
Radio
5%
49%
47%
34%
TV
47%
29%
Ad periodicals
10%
Newspapers
6%
Brazil
Mexico
Poland
Magazines
12%
Source: Video International, AKAR
Czech
Rep.
Russia
USA
Western
Europe
Source: ZenithOptimedia, 2005
TV has room for faster growth as the only truly nationwide medium in Russia
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New Sectors are Likely to Drive Further
Growth in Russian TV Advertising
Sectors advertised on TV
Sectors advertised on TV in developed markets
Rank
Russia
Rank
UK
Germany
USA
1
Telecoms
1
Retail
Auto
Auto
2
Beer
2
Auto
Confectionery
Retail
3
Refreshing drinks
3
Food
Mass media
Telecoms, Internet
4
Detergents
4
Finance
Telecoms
Medicines & Remedies
5
Dairy products
5
Cosmetics
Pharmaceuticals
Finance
6
Hair care
6
Entertainment
Beer
Food
7
Chewing gum
7
Business
Hair care
General services
8
Mobile equipment
8
Leisure
Detergents
Personal care
9
Leisure
9
Alcohol
Audiovisual
Movies, DVD & music
10
Groceries
10
Groceries
Finance
Direct response
Source: TNS/Gallup Media for Russia, ZenithOptimedia for Europe, the Ad Age Group for USA
Russian TV advertising market is still missing advertisers from a few large sectors such as
financial services, auto industry and retail
Note: 3Q05 for Russia, 2002/3 for Europe, 2004 for the USA
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CTC Media – Direct Play on
Russian TV Ad Market
„ Successful IPO on Nasdaq in June 2006:
„ Placed 18% of share capital including 5% primary
„ Gross proceeds of $380.5 million, $105 million net
proceeds to the company
„ $14 per share equivalent to market cap of $2.1
billion
„ Included in Russell 1000 index in September 2006
„ Nov 9 close: $23.20 per share, implies
market cap of $3.5 billion
„ Backed by strong strategic and financial investors:
„ Modern Times Group AB (40%); and
„ Alfa Group (26%)
CTCM is the largest Russian media company by market capitalization
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Competitive Landscape
Demographic Positioning (1)
Older
55
TVC
50
Euronew s
Culture
Rossiya
NTV
First
Zvezda
Sport
45
7TV
(Sport)
DTV
TV-3
40
Rambler
(niche)
35
5 channel
Domashny
Ren-TV
TNT
СTC
Younger
30
MTV
MUZ TV
(music)
25
20
0.20
0.25
0.30
Male Skew
0.35
0.40
0.45
0.50
0.55
0.60
0.65
0.70
0.75
Female Skew
Source: TNS/Gallup Media, 9 months of 2006
Competition in the free-to-air sector is very intense with 19 nationwide channels
Note:
(1)
Size of circles represents audience share
11
Competition from Other Media
Largest Pay-TV Players (‘000 subscribers)
Pay-TV Penetration
470
52%
19%
33%
33%
31%
23%
22%
22%
21%
47
29
9
1%
Hungary
DTH
WE Average
Cable
Poland
Czech Rep.
Russia
NTV-plus
Akado
Stream-TV
Kosmos-TV
Cable and Communal Antenna
Source: ZenithOptimedia 2004, 2005, Pyramid Research, 3Q05 data
Source: Company data, Sep – Oct 2006
Russian Free-to-air TV is under less threat from digital multichannel and internet
compared to European peers
12
Strong Audience Share Performance
2002 Audience Share (4+)
2005 Audience Share (4+)
‘State Owned
Broadcasters’
‘Followers’
‘Leaders’
29.0%
23.0%
‘Private Sector
Market Leaders’
‘Followers’
22.7%
19.4%
14.2%
11.1%
6.6%
10.3%
6.7%
5.0%
5.4%
3.5%
First
Russia
NTV
Source: TNS Gallup Media
CTC
Ren-TV
TNT
First
Russia
NTV
CTC
TNT
Ren-TV
Source: TNS Gallup Media
Over the past 3 years CTC has repositioned itself as one of the key TV channels in Russia
13
Targeting Audiences which are Most
Attractive to Advertisers
9M 2006 Audience Share (6-54)
2005 Audience Share (6-54)
21.0%
19.0%
18.6%
15.3%
13.4%
12.9%
10.9%
12.1%
8.4%
7.5%
5.7%
First
Russia
Source: TNS / Gallup Media
CTC
NTV
TNT
Ren-TV
5.0%
First
Russia
CTC
NTV
TNT
Ren-TV
Source: TNS Gallup Media
CTC is number three in its target demographic
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Genre and Origin Mix in the Market
TV Programs by Genres
Russian vs. Foreign Series
100%
100%
News
80%
Movies
60%
Series
Shows
40%
21%
33%
80%
60%
79%
42%
55%
67%
58%
40%
49%
Sports
20%
51%
45%
20%
Others
0%
0%
2001
2002
2003
2004
2005
2001
Foreign
2002
2003
2004
2005
Russian
Source: Video International Research Center. Based on information for the six leading TV channels: First Channel, Russia, NTV, CTC, Ren-TV, TNT.
Competition in the market is focused on Russian series, the primetime driver
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Growing CTC’s Audience Share
CTC Network Audience Share (4+)
9.2%
6.4%
2001
9.8%
2003
2004
CTC’s Programming Successes
10.3%
6.6%
2002
Time to establish 43% reach
Poor Nastya
Fall of 2003
My Beautiful
Nanny
Fall of 2004
Born Not Pretty
Fall of 2005
Who’s the Boss
Spring of 2006
2005
Source: TNS / Gallup Media
CTC’s success underpinned by innovative programming developed by us
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Mission of CTC Media
Offer new television in the context of
global post-Soviet society transformation
Dialogue with
audience as
opposed to
preaching
Audience
aspiration for
entertainment
Audience shift
towards private
values
Contemporary outlook
CTC – a romantic
version
Domashny – a
realistic version
CTC Media brands – the response to the challenges of post-Soviet era
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Programming Strategy
„ Emphasis on entertainment programming
„ No politics or “hard” news
„ Maximize effectiveness of CTC and Domashny brands
„ Focus on marquee branded Russian shows
Maximize audience numbers and
desirable demographics delivered to advertisers in a cost-effective manner
18
Track Record of Robust Financial Performance
2001-2005 Revenue Growth (US$ MM)
%
R 77
G
A
C
’05
‘01-
2001-2005 EBITDA Growth (1) (US$ MM)
237.5
-’0
‘ 02
155.6
95.6
24.1
2001
2003
R
CAG
5
0
’
‘02-
2004
2005
(1.1)
2001
81%
2002
2003
2004
2005
5 8%
90.2
‘01-’
62.6
GR 1
5 CA
0
15.4
15.1
2002
70.5
2001-2005 Net Income (US$ MM)
36.3
2001
104.1
16.9
2001-2005 Operating Income (US$ MM)
(2.7)
83%
39.5
47.0
2002
5C
R
AG
47.5
57.3
24.0
1.3
2003
2004
2005
2001
2002
2003
2004
2005
Consistent robust growth on all key financial metrics over the past five years
Note:
(1) Operating Income before depreciation & amortization, interest, tax but after programming amortization
19
Strong Performance in 9M 2006
Audience Share Growth (CTC)
wth
Gro
10%
10.9%
9M 2005
9M 2006
OIBDA Growth
%
109
110.2
52.8
9M 2005
wth
Gro
72%
252.9
147.1
9.9%
wth
Gro
Revenue Growth
9M 2005
9M 2006
Net Income Growth
wth
Gro
%
167
65.2
24.4
9M 2006
9M 2005
9M 2006
Outstanding growth on all key financial metrics
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Expansion Opportunities
Replace affiliates with O&Os
if and when appropriate
Own perpetual programming
rights if and when increased
distribution
Expand into other selected
media sub-sectors
Acquire other niche
channels in Russia
Expand in Russian-speaking
markets
CTC Media has a wealth of options to drive continued growth
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