Leading the Polish recovery

With leading market positions and a strong operating performance, TVN Group has outperformed its peer group. The Polish advertising market is on track to return to its peak 2008 levels this year. As a result, TVN Group is well positioned to benefit from the further development and digitisation of the Polish
media market.

TVN Group operates in three main segments: television broadcasting, satellite pay TV and online. Advertising accounts for 60 percent of total revenue, but the company's fastest growing segment is non-advertising subscription revenue – a key strategic focus. The group successfully managed its way through the global recession as it benefited from leading positions in TV and online advertising, as well as a strategic revenue diversification initiative into the pay TV satellite business. Today, following the rebound in the advertising market in 2010, coupled with the continued implementation of its strategic initiatives, TVN is optimally positioned to capture future market growth.

The fundamentals are strong: Polish GDP is expected to grow at approximately four percent in 2011, with consumer price inflation and unemployment rates to be contained below three percent and ten percent respectively. These macroeconomic forecasts provide the foundation for expected advertising market growth in the five to six percent range, with digital media outperforming the market average – a clear advantage for TVN Group's business model and market position. Prospective acceleration in private consumption should drive further increases in pay TV penetration, a key factor for development of the company's satellite platform – the fastest growing and most technologically advanced in Poland.

Broadcast fundamentals
The group's television broadcasting business segment has a strong track record of delivering market leading audiences and increasing its share of the television advertising market. Its main free-to-air TVN channel enjoys the number one position in the commercial target group, providing the group with the highest pricing power in the market. At the same time TVN is the leader in thematic channels, which continue to grow their audiences, driving both advertising and pay TV revenues. The group diversified into special interest channels in 2001, when news channel TVN24 was launched. Today this channel operates at an EBITDA margin of 50 percent, and is the most profitable news channel in Europe. Following the launch of TVN24, the group successfully introduced eight more thematic channels to the market. Its portfolio of channels covers general entertainment, news, weather, male and female lifestyle channels, teleshopping and business.

The success of the group's channels is primarily based on locally produced , accounting for approximately three quarters of airtime and composed of prize-winning shows in the key subjects of entertainment, news, reportage and documentaries. Top productions include localised formats such as Got Talent, Strictly Come Dancing, You Can Dance, Kitchen Nightmares and The X Factor, which airs for the first time this spring. TVN's daily evening news program Fakty outperforms the well established news programme of public television, while its series and sitcoms are extremely popular in Poland and beginning to attract interest from foreign broadcasters. The combined strengths of the main and thematic channels provide TVN with audience share leadership in the commercial target group, which has averaged 22 percent annually for the last five years. As a result, its schedule is a ‘must have' for any media plan in Poland. The group has converted this audience leadership into an impressive financial performance, capturing above one third of the total television advertising market revenues with an EBITDA margin exceeding 40 percent last year.

New technology
The ‘n' platform, TVN's satellite pay TV business, is the fastest growing operator in Poland. Since its launch four years ago it has built a customer base exceeding one million households and reaching approximately 20 percent market share in a highly competitive satellite pay TV environment. A winning formula for the platform is its technology leadership and innovative offering: all ‘n' subscribers are equipped with a MPG-4 decoder, enabling them to enjoy the widest and continuously expanding HDTV offer on the market – currently more than 20 channels. Furthermore, ‘n' subscribers have access to a number of advanced value added services such as PVR, internet radio or nPortal – a unique solution allowing the use of TVN Group websites directly through the television set. On the programming side the group continues to drive innovation, with unparalleled live coverage of all Champions League games and a unique live offering of the simultaneously played matches and their most exciting moments. In addition, TVN offers the market's first dedicated 3D channel.

The ‘n' platform has entered the next stage of its development as it delivered positive EBITDA for the first time in the second and third quarters of 2010, and is positioned to contribute to the group result for the full year 2011. This positive EBITDA performance will be driven by the continued growth of the customer base, cost streamlining initiatives, and a strategic partnership with TP SA, the Polish incumbent telecommunications operator. This partnership agreement is based on reciprocity of services allowing both companies to sell packages of owned and partnered offers. The focus is on a bundled broadband internet access and pay TV service offering, which has the highest growth potential given the relatively low broadband penetration levels in the country and the inevitable convergence between access and content products. The ability to market this offer and more specifically up-sell pay TV packages to TP SA broadband customer base of more than two million households puts the ‘n' platform in the avant-garde of satellite pay TV operators in Poland. Further growth potential in the market, both organic and through the consolidation of currently competing platforms, should yield good rewards.

Internet expansion
The online business segment of TVN Group is built around Onet.pl – the number one portal in Poland, attracting almost 70 percent of internet users in the country. With nearly three billion page views monthly, the online segment recorded revenue growth of approximately 17 percent and an EBITDA margin of close to 30 percent. The online operation's success is driven by a focus on quality content and the innovative use of advertising formats. With a clear vision of video gradually growing its share and ultimately dominating internet content, the group is leveraging its broadcasting experience, competencies and resources to the benefit of its online services. The increasing level of video in online services creates a unique opportunity for the introduction of rich media advertising – video-based and interactive advertising products – which will provide the next wave of growth in the online market. This coupled with structural shift in advertising budgets, from print to online media, provides solid ground for further top line growth, while online's strong operating leverage will lead to further improvement in profitability.

TVN Group's financial results of 2010 highlight its strong market position and successful track record. As the markets have returned to growth it is now benefiting from its investments made over the last two years. With a unique collection of diversified assets, highly skilled management teams in each business segment and a clear vision for further integrating the TVN Group business model in the attractive Polish market, it is confident in delivering additional growth and value for its shareholders.

For more information: www.investor.tvn.pl

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