Itv

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iTV stock plummets after court ruling

iTV Plc's stock took a 30-per-cent nosedive yesterday after the Central Administrative Court overturned a 2004 arbitration decision and investors began a selling spree.

The 2004 decision significantly cut concession fees paid by the television broadcaster to the government and allowed it to water down its original heavy concentration on news programming. Yesterday's decision reverses the situation, leaving iTV burdened with huge concession payments and needing to shed popular entertainment programming.

Brokerage houses rushed yesterday to lower the fair value of iTV's shares.

The stock, which closed on Monday at Bt9.35, started the day with a tumble and heavy selling pressure soon after the court's ruling pushed the price down to close at Bt6.55. A Seamico Securities analyst said that following the Central Administrative Court's ruling, it was now risky to invest in iTV shares, the fair value for which will tumble to about Bt4.

In January 2004, iTV won the Arbitration Court's consent to pay an annual concession fee of either 6.5 per cent of revenue or Bt230 million, whichever is higher.

The original rate was 44 per cent of revenue or Bt1 billion per year, whichever was higher.

The Arbitration Court also allowed the company to adjust its programming content. Its news/entertainment programme ratio was revised from 70:30 to 50:50.

However, the Office of the Permanent Secretary of the PM's Office, which awarded iTV the concession, asked the Central Administrative Court to override the Arbitration Court's ruling, claiming it was illegal.

Yesterday's ruling means iTV Plc will have to resume paying the original annual concession fees and return to the original proportion of news and entertainment programmes, as well as paying backdated concession fees of around Bt1.5 billion to the Office of the Permanent Secretary of the PM's Office.

iTV said it would appeal the case before the Supreme Administrative Court.

Kim Eng Securities estimated that iTV would swing into a net loss of Bt722 million this year if it lost the appeal, or a Bt757-million net profit if it won.

The broker cut its fair value for the broadcaster's shares to Bt5.20 each.

Its net-loss estimate takes into account the broker's current assumption that iTV's first-quarter net profit will drop by 3 per cent quarter on quarter and 36 per cent year on year to Bt103 million due to a sharp decline in gross margin.

A change in accounting methods imposed within the Shin Corp group in the first quarter also plays a role in the forecast.

Shin Corp now owns 53 per cent of iTV Plc.

Capital Nomura Securities has lowered its fair value for iTV shares to Bt2.04, while Sicco Securities downgraded the TV operator's fair value to Bt1.50 per share.

According to Dow Jones Newswires, an analyst at Trinity Securities said the court's ruling would reduce iTV's fair value to about Bt5 a share.

- TN

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COURT RULING

Bankruptcy looms for reeling iTV

An iTV employee weeps on hearing the Supreme Administrative Court ruling against the station.

Struggling station in no position to pay Bt94 bn in fines and might have to surrender licence unless govt shows leniency

The fairytale is ending as iTV finds itself teetering on the brink of bankruptcy and losing its broadcast licence following yesterday's landmark court ruling to enforce the "independent" station's original concession terms.

The Supreme Administrative Court upheld the Central Administrative Court's order to void the arbitration ruling on concession fee payments won by iTV. This means that iTV would have to pay Bt1 billion a year to the Prime Ministry's Office, which granted the concession, or at least Bt20 billion over the next 20 years of the concession term.

Plus iTV faces a fine of Bt100 million a day for breach of contract, amounting to Bt94 billion throughout the remaining contract period.

Reflecting the gloomy outlook, iTV's share price plunged 25 per cent yesterday to Bt2.10.

iTV, which is 54 per cent owned by Shin Corp, is virtually in no position to pay the concession fee, not to mention the huge fine that exceeds what Temasek Holdings of Singapore paid to the Shinawatra/Damapong families in its takeover of all of Shin Corp.

Over the first nine months of this year, when iTV was operating under amended concession terms, it eked out Bt364 million in net profit on revenues of Bt1.55 billion after deducting expenses of Bt1.20 billion. Its earnings pale in comparison with its greatly increased financial obligations.

Somkiat Tangkitvanij, a research director at the Thailand Develop-ment Research Institute, said iTV is facing a financial crunch and might have to surrender its TV licence to the state.

Temasek might decide to cut its losses on its iTV investment by handing back the broadcast licence since the television business is not its main money-spinner, he said.

If Temasek decides to give iTV back to the government, iTV could be improved to become a truly independent station or its name might be changed, depending on the government, he said.

Yesterday's court ruling marks yet another setback for ousted prime minister Thaksin Shinawatra, who has been accused of tolerating policy corruption.

Under his administration, iTV, still under the control of the Shinawatra family, was allowed by an arbitration panel to revise its concession with the PM's Office to the detriment of the office.

Earlier this year, the Supreme Administrative Court ruled against the Thaksin government by jamming the brakes on the privatisation of Egat Plc just before it launched its initial public offering.

Now iTV must immediately adjust its programming back to the original 70:30 ratio of news/documentaries to entertainment, said Jullayuth Hiranyawasit, permanent secretary of the PM's Office.

He said iTV was still obligated to pay a Bt1 billion annual concession fee to the PM's Office as well as a Bt94 billion fine for its long-running breach of contract.

The PM's Office has not decided whether the huge fine would be reduced or remain unchanged, he said, adding the PM's Office still has six months to go to court on the fine payment before the statute of limitations expires.

"The PM's Office can proceed with the fine payment now that the court's ruling has been issued [in favour of the office]," he added.

A few hours after learning of the ruling, iTV staff issued a statement accepting the court's decision and vowing to abide by it. But they still reserved the right to call for "fairness" over the huge fine iTV is liable to pay to the state.

The statement said all of iTV's 1,070 employees needed fair treatment so iTV can continue operating as a news station without intimidation from any individual or business.

iTV executive chairman Niwatthamrong Boonsongpaisan said the station would promptly correct its news and entertainment ratio from 50/50 back to 70/30. Then it would pay the concession fee at the old rate of Bt1 billion a year. However, iTV would hold talks with the Permanent Secretary's Office of the PM's Office first about the Bt94 billion in penalties, he said.

An iTV newscaster said most of the station's workers believe iTV will prevail no matter who will come to run it.

"None of the editorial staff wants to go anywhere else. We are still working as usual," she said. "However, I feel sorry for what happened. It seems the station is ill and we are waiting for the day it will recover."

An iTV newsreader said he has to wait and see what will happen after the court's verdict before deciding whether to stay or start looking for a new job.

Darunee Hiranruk, a mass media lecturer and architect of the concession for iTV in 1992, said there was a good chance for iTV to be transformed into a real public media organisation as intended when the station was set up.

iTV was born from the ashes of the pro-democracy movement to be an independent voice of the people.

She believed that Temasek could negotiate with the government on the fine.

"When iTV is returned to the state, the government should cut the concession fee as the old rate is too high, while the news-to-entertainment ratio of 70:30 can't bring in much income," she said.

The government should rapidly redistribute iTV's shares to the people in order to make iTV become a real public TV station, she added.