3.
3.1
3.
2
3.3
Financial Impact
Based on the foregoing assumptions, the total number of cable subscribers would be reduced by nearly 11% (10.96%) over the fifteen year franchise. Additional, had the more affluent, well educated SMATV subscribers been cable users they would have been more likely to have subscribed to the optional premium channels which produce higher revenues. This group of 11% of subscribers would represent 17% of cable's anticipated revenue.
While it has been assumed that cable will recapture market share (SMATV market share falls from 20% to 6%), that will occur at a considerable cost. Those costs include excessive operational and marketing costs. Also, reduced subscriber and reduced revenue for cable is not accompanied by compensating reductions in operating costs. This is largely because of the fixed and semi-variable nature of our costs, particularly
programming.
To present this impact more clearly, we set out below two sets of results based upon (A) the current HKCC business plan and (B) that plan eroded by SMATV.
3.4
(A)
HKCC
(B)
HKCC
Business Plan Business
(Without SMATV) Eroded By SMATV Difference
UNITS
UNITS
응
Revenue
100
83
-(17) %
Programming
32
31
Other Operating
24
21
Costs
56
5 1
52
Operating Margin
44
31
-(30)%
Before franchise
fees, interest
charges and
depreciation
/
The figures shown above are "units" not dollars; however they show the relative results. A 17% drop in revenue reduces operating margin from 44 units to 31 units; a reduction of 30%.
7
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