Wednesday, April 25, 2018

Asian Pay TV

Asian Pay TV (APTT) slumped 8.7% in unusually heavy volume over the past three trading days to a 12-month low of $0.47 following reports that the Taiwanese cable TV operator is embroiled in a content fee dispute.

According to the Taiwanese press, 24 cable TV operators in Taiwan has failed to reach an agreement on content royalty fees with Formosa TV, which has allowed them to broadcast three of its channels, FTV News, FTV One and FTV Taiwan only until Apr 30.

This is the third extension the network has granted cable TV operators since their contracts expired at the end of last year and the parties will have until the end of the month to negotiate a deal.

Among the cable operators involved in the dispute, five belong to Taiwan Broadband Communications (TBC), which is owned by APTT. Notably, TBC only airs FTV News and refuse to pay royalties for the other two channels that it does not carry.

The National Communications Commission has weighed on the matter and advised cable operators to see the value of having high-quality programmes in their channel lineup, which would in turn attract more subscribers. As such, they should pay the channel operators reasonable fees.

As the row is not specific to TBC and pertains to just one channel out of the more than 175 channels it offers on its cable TV platforms, we do not see any significant impact on APTT.

Another possible reason for the sell-down could relate to forced sale of shares owned by restricted persons, ie mainland Chinese who are forbidden to invest in the cable TV industry in Taiwan. However, the latest filing on 2 Apr only show the transfer of 17,000 units by such holders. Therefore, this argument can be ruled out. There is also no disclosure on any significant change in shareholding ownership.

As for any issues relating to its cable TV licences, TBC's operators were granted three-year extensions in 2017 and 2018 after the group fulfilled the requirement to digitise all five franchise areas and switched off analogue TV broadcasting.

APTT has also guided that it will maintain its 2017 distribution of 6.5¢ for this year, which implies an attractive 13.8% yield at current price. The trust will report its 2Q18 results on 14 May.

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