Astro Is Ready To Roll Across Asia

Step one for the Malaysian satellite-TV company: A push into Indonesia. Next stop, India?

For years, Astro PLC seemed to be overreaching with the name of its headquarters. After all, why should a monopoly satellite-TV company serving only Malaysia call its offices the "All Asia Broadcast Center"? Now, Astro is finally catching up to its ambitions. This spring the company will expand its TV operations outside its home turf, offering its own channels and foreign rebroadcasts such as CNN and Al-Jazeera to viewers in Indonesia. "Having built a strong domestic base, we are now beginning to roll out regionally," says David Butorac, Astro's chief operating officer.

The move comes just in time. In October, nine-year-old Astro's stranglehold on the Malaysian pay-TV market was broken when cable operator MiTV Corp. started broadcasting 41 channels in Kuala Lumpur. Soon, another cable rival called Fine TV plans to join the fray.

Astro, of course, has a big head start and will be tough to unseat. Part of billionaire Ananda Krishnan's empire -- which includes Malaysia's top cellular phone operator, Maxis Communications -- Astro has 1.8 million subscribers, or about a third of Malaysian households, up from 1 million customers in 2002. It also dominates radio, with nine stations that control 70% of Malaysia's radio advertising revenues. That adds up to big profits. Astro will post income of $59 million this year on sales of $561 million, and earnings of $91 million on revenues of $691 million in 2006, Macquarie Securities says.

Much of that will be spent in Indonesia.
In March, Astro sealed a joint venture with Jakarta-based Lippo Group to launch its satellite service there. Lippo owns Kabelvision, which offers cable in Jakarta and a handful of other cities. Together, the companies hope they can get much greater penetration with satellite, aiming to serve some 3 million households -- nearly 10% of all homes with TVs -- by 2010.

Indonesia, though, may be a battle.
The country is Asia's third most populous after China and India, but just 1.4% of Indonesian households with televisions subscribe to pay-TV, vs. 32% in China and 58% in India. That's great for Astro, of course, but it also makes the market appealing to rivals. The world's biggest pay-TV operator, Rupert Murdoch's News Corp., recently bought a 20% stake in Indonesia's Cakrawala Andalas, which has satellite and terrestrial TV operations.

Astro does have advantages over even a deep-pocketed rival such as News Corp. First, there's language: Indonesians and Malaysians mainly speak Bahasa, which should help Astro develop new shows more cheaply. Astro has programming tie-ups with Indian studios, which make shows for both Indian TV and Astro's Malaysian channels.

Content suppliers such as Walt Disney Co., Home Box Office, and others that have worked with Astro in Malaysia are ready to follow the company into Indonesia and elsewhere in the region. And Astro has a joint venture with Hong Kong's Yes TV to operate two 24-hour soccer channels with rights to games from top European clubs. "Astro is the most successful Asian pay-TV operator outside Japan and Korea," says Vivek Couto of Media Partners Asia, a Hong Kong consultancy.

After Indonesia, Astro wants to go deeper into the region. Although he won't say what countries might be next, Butorac expects non-Malaysian pay-TV operations to account for 40% of revenues within five years. "Our strategy is to be a regional cross-media player," he says.

Although he faces regulatory hurdles today -- few countries in Asia currently allow foreign-owned radio or pay-TV operations -- Butorac expects that to change in coming years. If it does, the company might just grow into its headquarters.

Source:
Assif Shameen,
BusinessWeek