Some of the 6 digital stations, which were expected to start functioning in the spring of 2007 (one year after granted license) began to reduce their CAPEX and laying off staff following a court decision calling the initial tender for licenses invalid.
Our view:
The case has become a solely legal process with the six digital stations appealing against the ruling. The court’s decision has been initiated by CME, which complained about the license grating process not being fair and consistent. CME applied for several licenses and was granted none. We believe that the process should at least postpone the start of digital broadcasting by a one year. We expected the digital stations to capture up to 3% of the TV ad market ~ USD13.5m, which is estimated to reach cUSD450m in 2006. Given TV Nova’s market share of c50%, the station should take additional cUSD6.8m from the market in 2006 ~ 3% of TV Nova’ estimated 2006F sales of USD235m.