Shane Huntley

NewCo Media Media Investments (Compiled & created by Shane Huntley) Africa Media Investment: EXECUTIVE SUMMARY OVERVIEW: The Opportunity The Proposal Recommendations • License holders and operational owners willing to sell assets have been located in the primary & secondary markets of interest. • Establish radio asset ownership initially across East & West Africa. • Establish full presence in West & East Africa to fully engage owners & opportunities. • Apply world-class strategy & tactics. • Sign NDA’s and move to DD. • Relationships are fully established. • Maximize empowerment opportunity to build African talent base. • Engage owners as local partners to enhance regulator relationship. • Extend vision to incorporate a single brand across multiple territories. • Owner/Partners to facilitate Client and Advertising Agency relations. • Look to extend brand to Music TV, through a global partnership. • Post M&A, engage regulator DG for final approval & sign-off, prior to investment transfer and takeover. • Owners have passed various checks to establish viability as potential local partners. • Discussions on price expectations have been achieved although a revisit will be required. • Average acquisition prices: - Primary USD 2- 2.5m - Secondary USD 1 – 1.5m • This is license/asset price only and does not include start up investment. • Establish brand ownership of major artists and DJs per territory. • Build multi-territory Brand Activation strategies. • Conduct world-class research and prepare each asset for launch or re-launch in of interest. EXPERIENCE ACROSS 5markets CONTINENTS • Extend opportunity into VAS services to mobile ‘entertainment’ content. OVER 70 YEARS OF COMBINED BROADCASTING • All investment must ensure control, with local partners retaining minority stake (15%). OVERVIEW: INSIGHTS & OVERVIEW OVERVIEW: Africa Media Investment: SSA INSIGHTS & OVERVIEW The Real Size of Africa Sub-Saharan Africa Population (mil) 936 Population Growth (% y-o-y) 2.53% Urban Population (mil) 337 Population Age Structure (% under 14) 43% Working Age Population (mil) 500 Population growth in next century: (millions) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,- Population doubles by 2050 & Triples by 2100 to become most populous Continent in the world. - SSA Nigeria Nigeria’s population may reach 1 billion by end of the century 31 SSA countries have implemented regulatory reform, including primary and secondary markets of interest, making it easier to do business in those Territories. (All figures 2013. Sources: World Bank & United Nations) OVERVIEW: Africa Media Investment: SSA INSIGHTS & OVERVIEW 3 Key Trends in Sub Saharan Africa 1. SSA FDI growth expected to triple 2011 to 2015 2. Intra-regional growth driven by improving value chains and strengthening regional integration. 3. Driven by sector focus from ‘extractive’ to ‘consumer facing’ industries Sub Saharan Africa Foreign Direct Investments: ➢ 2011 USD50 billion ➢ 2015 USD150 billion (est) (Sources: Citibank, World Bank & PwC/fDi Intelligence Q4 2014) Africa Media Investment: SSA INSIGHTS & OVERVIEW OVERVIEW: SSA is forecast to accelerate growth to 5.8% in 2015. Driven by: ➢ ➢ ➢ ➢ ➢ ➢ Expanding middle classes More effectively productive Urban centers Improved education Deeper Mobile penetration Greater access to credit Proliferation of mobile services, including banking, in major markets. (Source: IMF October 2014) World Resource %: -Oil: 10% -Gas: 7% -Minerals: 30% SSA FDIs: -USD50bn in 2011 -USD150bn in 2015E: IMF 2013 SSAfrica GDP % Growth Forecasts Uganda SSAfrica Consumer spending to reach USD2tril in 2020. (Source: Citibank 2013) Ghana Nigeria Kenya Tanzania NOTE: Due to the oil price crisis, Nigeria has revised its 2015 GDP growth forecast from 6.2% to 5.5%, based on an expected 2015 oil price leveling at USD65 a barrel. (Source: Int’l Telecoms Union and TA Telecom 2014) (Source: Min. of Communications, Nigeria) OVERVIEW: PRIMARY & SECONDARY MARKETS OF INTEREST Africa Media Investment: SSA POINTS OF ENTRY Investment entry based on: Nigeria Uganda • • • • • Political & economic stability Strong middleclass growth Positive Ad-market maturity and growth Increasing Urbanization Expanding Telecoms infrastructure 1• Key markets of entry are Nigeria and Kenya with: Ghana Kenya Tanzania 1 Needle Shifters & operations base 2 Essential secondary markets 3 Markets to watch & assess for possible investment - Good political stability - A large and vibrant media industry - Strong international Ad-Agency presence - Growing Ad revenues - Well established parameters for agency commissions and discounting. 2• Secondary markets of importance: - Tanzania/Uganda/Ghana. The market attributes are at similar levels to the Kenyan & Nigerian markets, although advertising revenues are smaller by Comparison. 3• Markets to watch are Ethiopia, Rwanda, Cote d’ Ivoire, Angola and Zambia. Zambia is already capturing the attention of int’l media players from both on & off continent. All markets contain strong & growing Telecomms infrastructure with international cellular presence, good commercial and monetization strategies, which can lead to the development of VAS Mobile Services as new revenue streams for radio. Africa Media Investment: MARKETS OF INTEREST OVERVIEW: Primary Markets Of Interest Population GDP per Capita PPP Radio Pop. Reach Net Radio Market Local Partner/s (2013/14 Act.) 174 mil NG KN 44 mil USD5,360 USD2,780 90% (2014 estimates) 98% (2014 estimates) USD112m (Lagos after discounts) Available. Needs Neg. USD106m (Nairobi after discounts) Available. Needs Neg. Secondary Markets Radio Discounts = radio share of all advertising minus 40% (AVG)method error and minus 20% Of Interest to account for all commissions, and localized to % share of revenue applied to city of interest. 87% TZ 48 mil USD1,760 (2013 estimates) GH 25 mil USD3,900 (2014 estimates) UG 36 mil USD1,470 (2014 estimates) TOTALS/AVG: 327 mil usD3054 85% 95% USD32.7m (Dar after discounts) USD19.7m (Accra after discounts) USD27.8m (Kampala after discounts) Available & Positive Available & Positive Available & Positive usD298.2m (SOURCES: CIA World Factbook/GDP PPP = World Bank 2013/Balancing Act Africa Report – Aug 2014/OMD Africa & Telecoms - adjusted revenues) Africa Media Investment: MARKETS OF INTEREST NIGERIA KENYA TANZANIA GHANA UGANDA Foreign Ownership 100% 100% 49% 100% 100% Total Ad Revenues USD4b USD1.7b USD425m USD240m USD316m Radio Total Ad Share 13% 29% 35% 42% 44% Primary City Ad Share 54% (Lagos) 54% (Nairobi) 55% (Dar) 49% (Accra) 50% (Kampala) 70% 60% 0 0 0 Local Music Quota • • • • • • • Nigeria’s media revenues are projected to reach an estimated USD8.5bn by 2018, more than double 2013 revenue of USD4bn, with a CAGR of 16.1% - one of the fastest growth rates in the world. Nigeria internet subscribers to surge from 7.7mil (2013) to 50.1mil by 2018. (Mainly via mobile) Kenya advertising revenues are expected to reach USD3.1bn in 2018 (USD1.7bn 2013). Kenya’s media market will grow at a CAGR of 16.3% over the next 5 years. Kenyan Internet revenues expected to surpass USD1bn in 2018 TV and Radio in Kenya will account for a combined USD1bn plus in 2018, while radio remains the most important medium despite Kenya’s increasing urbanization. Tanzania majority ownership to be achieved by legally housing interests in Trust with lawyers. 2013 advertising revenues in the 5 markets of interest reached a total USD6.67bn (Sources: Ownership = Regulators/Revenues & Share: NG & KN = PwC 2014, TZ GH UG = OMD 2013/Music Quota = Local Media Owners) Africa Media Investment: MEDIA LANDSCAPE LAGOS Competitive Landscape • Radio ‘personality’s’ rule the market and drive both revenue & ratings. • ‘Events’ alignments are extensively used to build brand perceptions and generate revenues. • Relationships with advertising industry are key to revenue generation in Lagos – more so than CSOL. • Most station output is highly Americanized. • Core radio disciplines largely ignored with excessive talk, weak music management & poor execution. • Branding & positioning often confused & cluttered with too many messages and poor production. • Music scheduling rules not being applied and DJs are often allowed to play ‘own choice’ of music. • News is a priority & 15 minute bulletins are normal within the Lagos market. GHANA: Competitive Landscape ▪ Peace FM dominates audiences while Joy FM dominates revenues within the market. ▪ Political News/Talk dominates most Accra based radio stations with extensive talk time dedicated to the topic. ▪ There is no ‘true’ music format in the Accra market and most stations have 4-5 formats on one station. ▪ Commercial content exceptionally poor with unprofessional scripts, weak production & pirated soundtracks. ▪ With almost no music cd/dvd retail outlets, most music content is downloaded or pirated. ▪ Exceptionally poor on-air disciplines and a ‘blind leading the blind’ broadcast culture. ▪ Station branding & positioning poorly executed, confused, over produced and a reflection of 80’s radio. ▪ Talent pool success stories are defined more by longevity in the market, rather than broadcasting skills. TANZANIA: Competitive Landscape ▪ Clouds FM dominates the Dar Es Salaam radio landscape with a mix of Swahili & English languages. ▪ Swahili is regarded as the unifying language with little English spoken outside of major centres. ▪ Multiple formats feature across most radio stations with no adherence to core genres that create true format. ▪ On-air disciplines are present but poorly executed with excessive talk, cutting of songs & poor use of imaging. ▪ Research largely untrusted with advertiser & agency relationships key to revenue generation & success. ▪ Client commercial production content is below standard & often unfit for broadcast. ▪ News content poorly executed with untrained readers across many stations failing to communicate effectively. ▪ Very few ‘Personalities’ in the market. Most on-air staff essentially bland & weak communicators. ▪ Only 2 potentials available in the market with no new licenses forthcoming. Africa Media Investment: MEDIA LANDSCAPE KAMPALA: Competitive Landscape (2 stations available from single owner) • Uganda is one of SSA’s largest ‘Radio’ consuming communities. • These stations are predominantly Commercial, but with significant growth in the Community Radio sector. • Uganda has seen extensive growth in preferences for ‘local’ music and ‘African’ music, with off-continent music content showing less traction than anticipated by music companies. • There are currently 74 radio stations broadcasting in the Capital City, Kampala. • The bulk of these ‘Kampala’ stations are non-contenders and poor performers with a handful of 5 stations dominating revenue and ratings. The remainder are either exceptionally small operations with minimal investment, operating at a loss, or funded off-shore for religious, NGO or Educational purposes. NAIROBI: Competitive Landscape • The major players are Citizen, Nation, Radio Africa, Standard and Media Max (the Kenyatta family). • English mainly works in Nairobi & Mombasa. Swahili stations lead. Vernacular station listeners turn to Swahili stations for News. • 15-17 year old market is not connecting with radio. Loyalty lies with 45+ audiences. 15-24 years are station hoping with little loyalty. 25-34 year olds are predictable and staid in their listening habits. • Kenya is the most mature of the radio markets with strong commitment to international training and research. • However, this does not reflect well in actual station output with excessive unfocused talk & poor disciplines. • Direct consumer communication & interaction are essential to success. NewCo Business overview ➢ ➢ ➢ ➢ ➢ ➢ ➢ Traditional FM radio that delivers results for all stakeholders. Personality driven radio to establish a fast foothold and create the WOW factor. News content that reflects listener home, heart & bank balance concerns Superior & constant radio research. Music strategies that reflect market wants/needs and are constantly evolving. Setting standards of accountability, reliability and professionalism with trade. A commitment to delivering the most powerful radio experience of today. NewCo Radio Aims to: ➢ Outpace competitors on performance, professionalism and delivery. ➢ Over-deliver on client expectations to build trust, reliability and complete accountability. ➢ Become one of the top 3 radio stations within the environment in 2-3 years . Africa Media Investment: COMPETITIVE ADVANTAGES MARKETS • • • • NewCo founders have first hand & extensive African experience across all markets of interest, and beyond. 3 years of building relationships in each market with owners, Regulator, Advertising Industry & top talent. Market understanding gained through 3 years of market analysis, research and direct market presence. A clear focus on owners with investigated backgrounds , powerful relationships and established market history sets up NewCo for success, investment protection & open doors to clients and Ad Agencies. STRATEGY • World class broadcast research is priority number 1 with full preparations accomplished & an accredited international (off continent) research unit having done full preparations, including locating effective and recognised fieldwork teams, for market entry. • This investigative research was employed once in SA and grew audiences by 500, 000 in Johannesburg. • To include Music Cluster Analysis, Format Finder tests, Auditorium Music Tests and client focus groups . TALENT • Lack of knowledge, skills and training is clearly evident across every market of interest. • NewCo media brings a collective 70+ years of training, coaching and talent development across all media departments including Management, Programming, Sales, Marketing, Creative, Content & Talent growth. • All talent to be empowered with world class training and technologies that create success. • Systems & structures that set people up for success to be installed across all business departments . PRODUCT • Product development to be fully informed by research outcomes. • Research will define target audience, format, song selection, brand personality, positioning strategy, marketing, client and Advertising Agency strategy and communications. • Product focused on the most viable opportunity/audience in the market, as confirmed through research. • Impact to be achieved through communications, creative, talent, production & output superiority. REVENUE • • • • • Established partner relationships to open doorway to key clients and Ad Agencies in each market. NewCo to maximise South Africa adspend in Africa through established contacts and relationships. Complete attention to creative excellence, performance delivery, transparent reporting and accountability. Outstanding creative approaches to markets that sets major points of differentiation from competitors. Maximise inventory management, Non traditional revenues and CRM budget impacts. OVERVIEW: OPPORTUNITIES AT HAND Africa Media Investment: PRIMARY TARGET MARKETS OVERVIEW: .. • • • • • • • • • • • • • OPPORTUNITY: • LAGOS, NIGERIA • Greenfield license • Relationship with owner established Unused license available in Lagos, Nigeria. Owners have operational stations in Lagos Currently insufficient funds to launch new station Investigated fully as potential partners. Following clarification on issues presented, owner passed necessary investigations. Asking price for unused license is USD2mln Negotiation not an option Local partners to retain 15% stake. Agreed that local partner will facilitate the regulator relationship & protect investment. Owner will facilitate introduction to Ad Agencies. Shared resources can be made available including sharing of broadcast tower which is over 100mtrs and gives coverage to greater Lagos. Potential space sharing is an option. Owner unable to cover % costs for start up and a shareholders loan will be necessary. Details TBD. OPPORTUNITY: • NAIROBI, KENYA • Greenfield license • Relationship with owner established • • • • • • • • • • A currently used, but ‘rented’ license available. The current FM has low market reach and is used mainly as a brochure to other businesses involving events, sports and associated client interviews. Sales contributes less than 20% to bottom line with little focus on Sales. License owner is personally well known and willing to sell. Asking price for license is USD2mln – negotiable. Current license/frequency renters will have no problems relocating (for a second time). License owner is open to partnership and has been investigated fully as viable local partner. Owner has 20 years of experience with regulator and Government Communications. Owner will facilitate Ad Agency relationships Owner also has additional media assets that have received investment from TMG, South Africa. Africa Media Investment: SECONDARY TARGET MARKETS Currently Operational Accra, GH Mwanza, TZ Dar, TZ Kampala UG Kampala UG Sole Owner Sole Owner Family Owned Family Owned 2 Partners 2 Partners Operational Operational Operational Operational Operational Operational Accra Based +2 Accra Based Mwanza +3 Dar based +9 Kampala Kampala +1 80% avail. 70% avail. 85% avail. 70%-80% avail. 85% avail. 85% avail. No Ads/News No News Full service Full service Full service Full service Music clusters 100% local 100% local Int’l/local mix Hip Hop/R&B Int’l/local mix Automated 24/7 Live Low budget Auto 22-06 Auto 22-06 Auto 22-06 17 Staff 29 Staff 22 Staff 31 Staff 13 Staff 65 Staff Accra, GH + refers to additional b/cst regions. 2 years grooming owners for a sale. All owners have passed stringent background checks OVERVIEW: THE INVESTMENT OPPORTUNITY Africa Media Investment: PRIMARY MARKET P&L (NG/KN) Income statement (kUSD) P&L 2016E 2017E 2018E 2019E 2020E 1,553 3,573 130% 6,162 72% 9,451 53% 13,592 44% Ops & Distrib - - - 653 1,348 771 780 1,829 840 G&A 328 355 385 419 455 1,321 1,427 1,541 1,664 1,798 Revenues Total net revenues Growth (%) Costs Programming Sales & Mktg HO Costs 3,160 Total Costs Growth (%) EBITDA Margin (%) Depreciation EBIT EBIT % Incremental EBIT -1,607 AddingTax = NOPLAT + Depreciation -1,748 - Capex +/- Change in working capital CusD 30 Free Cash Flow • • • • 141 -1,748 -113% - 682 CusD 25 -2,430 3,575 4,138 4,855 5,702 13% 16% 17% 17% -2 0% 141 -143 -4% 79% -143 141 2,024 33% 141 1,884 31% 78% 283 1,601 141 4,596 49% 141 4,454 47% 78% 668 3,786 141 7,890 58% 141 7,749 57% 80% 1,162 6,586 141 (104) -106 (131) 1,611 - 35 (166) 3,726 Accounts for 50% method error & 20% Agency discounts/commissions Primary market ‘Sales & Marketing’ figures accelerate to 2020 due to bad debt provision at 10% Break even in year 3. Investment payback in year 4. Highly conservative & assumed NET Revenue Share: (Y1) 1%, (Y2) 2%, (Y3) 3%, (Y4) 4%, (Y5) 5% (214) 6,514 Africa Media Investment: SECONDARY MARKET P&L (TZ/GH/UG) Income statement (kUSD) P&L 2016E 2017E 2018E 2019E 2020E 1,655 3,044 84% 4,814 58% 7,046 46% 9,839 40% Ops & Distrib - - - - - G&A 277 290 306 323 341 1,485 1,618 1,792 1,934 2,123 9% 11% 8% 10% 1,426 47% 126 1,300 43% 90% 195 1,105 126 3,022 63% 126 2,895 60% 90% 434 2,461 126 5,112 73% 127 4,985 71% 94% 748 4,238 126 7,716 78% 127 7,589 77% 93% 1,138 6,451 127 597 - - -560 (84) 1,147 (107) 2,480 Revenues Total net revenues Growth (%) Costs Programming Sales & Mktg Total Costs Growth (%) EBITDA Margin (%) Depreciation EBIT EBIT % Incremental EBIT -% 7 37 AddingTax = NOPLAT + Depreciation - Capex +/- Change in working capital CusD 30 Free Cash Flow • • • • CusD 25 - Accounts for 30% method error and 20% Agency discounts/commissions Break even in YEAR 2 Investment payback in YEAR 3 Assumed NET Revenue Share: (Y1) 2.5%, (Y2) 4%, (Y3) 5.5%, (Y4) 7%, (Y5) 8.5% 32 (141) 4,190 (176) 6,402 Africa Media Investment: MARKET INVESTMENT SUMMARY Primary Market Secondary Market in kUSD In kUSD •License (@ max price) •Capex •Capex (Construction work) •Pre-launch research Day 1 Investment (1) - •License (@ max price) •Capex •Capex (Construction work) •Pre-launch research Day 1 Investment (1) •Staff(2) Year 1 Investment (3) = (1)+(2) - •Staff(2) Year 1 Investment (3) = (1)+(2) 1,-,-,474 •Estimated Accumul Net Revenue •Accumul OPEX, Mktg & fixed costs •Accumul Staff : Year 2 Investment - •Estimated Accumul Net Revenue •Accumul OPEX, Mktg & fixed costs •Accumul Staff : Year 2 Investment - 1,655 Total Investment Year 1-2= (3)+(4) 5187 Total Investment Year 1-2= (3)+(4) 2,438 - REVENUE MODEL • The primary source of revenue will be from the sale of airtime spots to advertisers • Rate card to offer up to 10 minutes of advertising per hour, with premium rated spots available before & during News broadcasts. • Price of spots will vary year to year to reflect radio’s increasing Listeners, power index, and share of market • Pricing will also vary according to time of day required by advertisers. • Advertising spot rate to start at 75% of current top 3 radio stations in the market with annual increases of approximately 10%. • Secondary sources of revenue to include concerts, promotional events, outside broadcasts, product launches, competitions, merchandising, CRM, loyalty club & other available sources of non traditional revenue. OVERVIEW: APPENDIX Africa Media Investment: STUDIO MODEL The ‘Studio Model’ is specifically designed by Africa and for Africa using a combination of African and international technologies, and highly experienced African expertise. ➢ ➢ ➢ ➢ ➢ ➢ ➢ All technologies are cutting edge & current. Full broadcast needs are included. Full recon, reporting and accountability incl. Complete automation enabled. Remote record & broadcast capable. 14 week timeline to broadcast from order. Simple & effective with full training. • Box-in-box solution with construction in South Africa, delivery to point of broadcast and installation within 14 days. • Costs include light bulbs to transmitter, but does not include on-air scheduling and play-out software, which is accounted for separately. THE MOST COST-EFFECTIVE SOLUTION ON THE MARKET! (NOTE: Studio pictures are actual examples of work completed in Africa by supplier) Africa Media Investment: OPERATIONAL HEADCOUNT Phase 1 Staff Profile (Greenfield) All Local Station Managers Report to Africa Head of Radio: Local Station Manager HO Finance HO Sales & Marketing HO Programmes • Finance Assistant • Sales Assistant • Music Assistant • Office Manager • 3 Account Execs • 5 On-Air DJ’s (P/T) (Managed by Finance) • Traffic Manager • Commercial Prod • IT Assistant • Copywriter • Prod Assistant • • • • • Streamlined structure at start. Designed for a music based station. Focused on efficiency. No News at startup. Very high Production values to extend and maximize brand impact from start. • All key positions to be supported by Assistants in case of illness or leave. • Maximize ‘off-peak’ efficiencies with world class automation. • All staff fully empowered with the right software and hardware. TOTAL STAFF AT START-UP: 11 F/T, 5 P/T + 5 Assistants First-Hand Operational Comparisons: • • • • • Experience shows that most stations in the markets of interest suffer similar problems with excessive staff numbers, poor skillsets, severe lack of training and lack of empowerment through poor technology. These issues will be overcome through consistent staff development and training, and correct technologies. All essential positions are covered in the above ‘experience-based’ model, with no excess or frills. Station Manager should be a credible and respected figure in media with strong ties to the advertising industry, and well established client relationships. This will require an above average salary. The use of assistants will: -contain staff costs and provide empowerment opportunities through ongoing mentoring and training. -ensure that every critical position has back-up and support in the event of illness, annual leave or poaching.