• The Edge Financial Daily reported that the date for analogue swith-off (ASO) will be deferred to a later date, from June 30 that was previously scheduled. It cited Communications and Multimedia Minister Datuk Seri Dr Salleh Said Keruak as saying that the deferment was necessary to ensure a fully digital broadcasting environment — digital TV coverage stood at approximately 85%, leaving 15% of the geographical areas to be covered.

• While we expect Astro Malaysia Holdings (Astro) to benefit somewhat from ASO, note that we have not accounted for its implications in our forecasts. Similarly for Media Prima, we have not assumed the switch from a capex model (owning transmission equipment) to an opex model (paying service fees to MyTV) in anticipation of ASO, pending finalisation of the exercise.

• To recap, upon ASO, video contents will no longer be broadcast through analog signals but via digital transmission, which requires either a set-top box (STB) or an integrated digital televisions (iDTV) for content reception. The perks are, households will be able to enjoy contents of better quality and potentially more free channels.

• However, the need to purchase an STB or iDTV could result in reduced household penetration in the local FTA TV industry, as consumers get wider (if not better) options such as Astro's NJOI and Telekom Malaysia's unifi TV. While both the alternative platforms offer Media Prima's channels and contents, it is likely to dilute viewership due to the availability of various other channels. This creates a cloudy operating environment for Media Prima.

• For Astro, we believe ASO creates opportunities for the group to increase NJOI's household penetration. Besides a potential increase in NJOI revenue, higher household penetration also broadens the addressable market of Go Shop and bodes well for the group's pay-TV subscriber base given the upgrade process from freemium to premium service is seamless

• Other media players like Media Chinese International and Star Media Group have negligible exposure in the TV industry and hence, are likely unaffected.

Source: AmInvest Research - 6 Mar 2018