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Network18’s margins take a hit with new launches

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Network18’s margins take a hit with new launches

Network18 Group has reported a growth of 24 per cent in consolidated revenues at Rs 503.8 crore for the quarter ended December 31, 2011, compared to the corresponding quarter last year. But this growth was at the backdrop of a one-time expense of launching four channels, write-offs, offset revenue gains and increased expenses – forcing the company to report a loss of Rs 85.81 crore, as against a profit of Rs 78.61 crore in the same quarter last year.

TV18 Broadcast incurred launch costs and operating losses amounting to Rs 25 crore towards their new channel History TV18. Even 45 per cent increase in revenues of TV18 to Rs 342.8 crore did not help them avoid losses. “It has clearly been a sluggish phase for the industry as a whole. Advertising revenues continue to exhibit lacklustre growth and may continue at the same pace over the next few months. During the last quarter, our profits from continuing operations were offset by largely one-time costs incurred towards investments in the expansion of our television channel portfolio and the conscious impairment of our film library given the deferment of our Hindi movies channel,” said Sai Kumar, Group CEO, Network18, in a company statement.

At Viacom18, Rs 39 crore of one-time expense was incurred in relation to the deferment of the Hindi movie channel and Rs 20 crore were incurred with respect to launch costs of Sonic, Comedy Central and Colors HD channels. In addition, the company has taken write-offs at The Indian Film Company to the tune of Rs 14.6 crore. Only 50 per cent of these numbers (Rs 37 crore) are reported in TV18 Broadcast’s current quarter’s statement. The remaining 50 per cent (Rs 37 crore) and Rs 25.3 crore of the launch of AETN18 have not been included in the current quarter.

Notwithstanding the challenging macroeconomic environment, Network18 continued to perform steadily and business continued to consolidate and grow, said Raghav Bahl, Managing Director, Network18. “Earlier, there were concerns about potential fund raising plans for the company, but the company is in a better position now with the deal with Reliance. The company will not be looking to consolidate its business,” said an analyst, who did not wish to be quoted.

It may be recalled that earlier this year, RIL divested its investments in Eenadu Group to TV18 Broadcast Ltd, for which Network18 and TV18 will be raising funds for the acquisition of ETV channels through a Rights Issue. Independent Media Trust (IMT), a trust set up for the benefit of Reliance Industries Ltd, has agreed to fund the promoters of Network18 and TV18 to enable them to subscribe to the proposed Rights Issue. As part of the deal, Infotel Broad Band Services Ltd, a subsidiary of RIL, has entered into a Memorandum of Understanding with TV18 and Network18 for preferential access to all their content for distribution through the 4G broadband network being set up by it.

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