July 2013 LatAm...MGM and Horror Channel • 10 channels with JV partners including 8 channels with...

Deal Overview Appendix

July 2013

DRAFT – FOR DISCUSSIONChellomedia Preliminary Valuation Summary

(US$ millions)

2

• Based on a sum-of-the-parts analysis, we believe Chellomedia will be valued in the range of $822mm to $998mm

– The valuation implies 8.9x – 10.8x CY2012 EBITDA and 8.5x – 10.4x CY2013 EBITDA

– The valuation is pre-diligence, assumes no synergies and gives full credit to Chellomedia’s projections

Note: Figures assume exchange rate of 1.3x € to USD.(1) CY2012 EBITDA of $92.3mm.(2) CY2013 EBITDA of $96.2mm.(3) Does not include synergies.

Chello Zone

DRAFT – FOR DISCUSSIONChello Zone Overview

4

Summary Financials (US$mm)Overview (1)

• Portfolio of 20 channels comprising of:

• 10 owned channels including well-known brands such as Jim Jam, Extreme Sports, MGM and Horror Channel

• 10 channels with JV partners including 8 channels with CBS

• Content covers entertainment, movies, children’s, sports and lifestyle

• Total of 189 million subs as of April 2013, representing a 8% growth from CYE 2011

• Subscription and advertising comprise of 60% and 30% of total revenues, respectively

• Overall, the top 5 countries account for more than 60% of total revenues

• Channels are distributed widely across EMEA with carriage on over 1,000 operators

• Top 5 carriage operators accounted for 28% of total revenues

Note: Figures assume exchange rate of 1.3x € to USD.(1) All data as of or for April 2013A YTD.(2) Pre eliminations.

Revenue Breakdown (1)(2)

Revenue By Genre

Revenue By Country

Revenue

EBITDA

’11 – ’13 CAGR: 17%’13 – ’18 CAGR: 6%

’11 – ’13 CAGR: 1%’13 – ’18 CAGR: 5%

DRAFT – FOR DISCUSSIONChello Zone Strategic Rationale

• Overall, Chello Zone channels have strong brand fit with the SPT Networks portfolio and we see some meaningful opportunities in rolling-up the Chello Zone channels into existing SPT Networks brands (AXN Black/ White/ Spin or Movie properties)

• Particular interest in MGM, as well as channels jointly-owned by CBS EMEA and CBS UK

• Expected benefits include:

• Improved market position with increased reach which can be leveraged for future ad sales representation negotiations

• Potential opportunity to create local market feeds to access local advertising

• Greater content buying power across the region

• Access to CBS franchises that can be leveraged across the portfolio

• Improve economics by launching OTT catch-up services (CBS Action, Reality, Drama), SVOD services complementary to Animax (Horror Channel SVOD) and premium VOD

• Potential cost synergies (e.g. rolling Russian and African feeds into existing operating units, fold into SPT Networks’ London hub to deliver operational synergies)

5

DRAFT – FOR DISCUSSIONChello Zone Channel Portfolio Strategy

6 (1) As of April 30, 2013.

DRAFT – FOR DISCUSSIONChello Zone Preliminary Valuation

(US$ in millions)

7Note: Figures assume exchange rate of 1.3x € to USD. Fiscal year financials assume 75% of prior calendar year and 25% of current calendar year.

• SPT Networks estimates a preliminary enterprise value range of $235mm-$275mm based on Chellomedia financial projections and on a target IRR of at least ~20% on the low view and a positive NPV on the high view

– The valuation implies 11.3x – 13.3x FY13 Adj. EBITDA and 9.8x – 11.4x FY14 Adj. EBITDA

– The valuation is pre-diligence and gives full credit to Chellomedia’s projections, but excludes synergies to SPT Networks

METHODOLOGY IMPLIED ENTERPRISE VALUE COMMENTS

DCF - Exit Multiple

■■

WACC Range: 13.5% - 14.5%Terminal Multiple: 9.5x - 10.5x

DCF - Perpetuity Growth■■

WACC Range: 13.5% - 14.5%Perpetuity Growth: 3.5% - 4.5%

Trading Multiples - FY14E EBITDA

■Trading Multiple of FY14E EBITDA Range: 10.5x - 11.5x including a 25% Equity Control Premium

Trading Multiples - FY13A EBITDA

■Trading Multiple of FY13A EBITDA Range: 12.0x - 13.0x including a 25% Equity Control Premium

Transaction Comparables - LTM EBITDA (FY13A)

■Transaction Comparables Multiple of LTM EBITDA (FY13A) Range: 12.0x - 13.0x

$249

$249

$253

$256

$265

$269

$269

$277

$303

$295

$225 $250 $275 $300 $325

Enterprise Value

High View: $275Low View: $235

Chello Multicanal

DRAFT – FOR DISCUSSIONChello Multicanal Overview

9

Overview (1)

• Chello Multicanal is the biggest producer of thematic channels in Spain and Portugal, with a growing presence in Africa

• Portfolio of 20 channels comprising of:

• 13 owned channels including some of Chellomedia’s strongest offerings, such as Canal Hollywood, Odisea and Canal Cocina

• 7 channels with joint venture partners

• Top 10 channels (excl. The History Channel Iberia) represent 60% of subscribers and 72% of revenues

• Total of ~49 million subs as of April 2013 with an average of 35 million paying subs

• ~80% of revenues generated from subscription-based revenue

• Advertising revenues and services to JV channels make up ~10% each of revenues

• Carriage agreements with a wide variety of operators, including all the major players in Spanish and Portuguese markets



Revenue By Genre

Revenue By Country

’11 – ’13 CAGR: 2% ’13 – ’18 CAGR: 6%

’11 – ’13 CAGR: (1%)

’13 – ’18 CAGR: 3%Revenue

EBITDA

Summary Financials (US$mm)

DRAFT – FOR DISCUSSIONChello Multicanal Strategic Rationale

10

• While several of the Chello Multicanal channels are a strong complement to the SPT Networks portfolio, many of the others hold niche positions in their respective markets, with limited distribution and brand equity

• Strong position in Portugal with channels such as Canal Hollywood and Panda

• Largely niche channels in Spain where Chello Multicanal has limited leverage with the top three operators (i.e., Sogecable, ONO and Telefonica), along with sluggish ad sales

• Agreements with key operators are due to expire in the near future and renegotiations are expected to be challenging

• In the event of an acquisition, we expect that many of the lower-rated low distribution channels will need to be shut down

• Odisea, Canal Hollywood, and the movie and children’s channels jointly owned with Dreamia would be of greatest interest, and can be useful in reinforcing the AXN portfolio, particularly in Portugal and Angola

• Strong JV channels – Historia and Bio – have heavy original content and allow for OTT and SVOD expansion

• Chello Multicanal’s strengths lie in low-cost original production, mainly in the lifestyle genre, which can be leveraged across the SPT Networks portfolio

DRAFT – FOR DISCUSSIONChello Multicanal Channel Portfolio Strategy

11(1) As of April 30, 2013.

DRAFT – FOR DISCUSSIONChello Multicanal Channel Portfolio Strategy

(Cont’d)

12(1) As of April 30, 2013.

DRAFT – FOR DISCUSSIONChello Multicanal Preliminary Valuation

(US$ in millions)






DCF - Exit Multiple■■




Trading Multiples - FY14E EBITDA ■ Trading Multiple of CY14E EBITDA Range: 10.5x - 11.5x including a 25% Equity Control Premium

Trading Multiples - FY13E EBITDA ■ Trading Multiple of CY13E EBITDA Range: 12.0x - 13.0x including a 25% Equity Control Premium

Transaction Comparables - LTM EBITDA (FY13E)

■ Transaction Comparables Multiple of LTM EBITDA (FY13E) Range: 11.5x - 12.5x$268

$280

$251

$250

$250

$291

$303

$274

$305

$275

$175 $225 $275 $325 $375

Enterprise Value


Chello Central Europe

DRAFT – FOR DISCUSSIONChello Central Europe Overview

15

Summary Financials (excl. At Media) (US$mm)Overview (1)

• Chello Central Europe, based in Budapest, includes a channels business as well as an ad space resale business , At Media

• Portfolio of 13 channels, comprising:

• 12 owned channels, including leading sports, children’s, factual, movie and lifestyle channels

• 1 MGM-branded joint venture channel (55% owned) with NC+ in Poland

• Total of ~46 million subs as of April 2013, representing a 12% growth from CYE 11

• Top 5 channels account for more than 75% of the segment’s revenues with Sport1, Sport2, Spektrum, Minimax and TV Paprika the key drivers of performance

• Excluding At Media, 90% of Chello Central Europe revenues are generated from subscriptions, with advertising and other revenues making up the remaining 10%

• The At Media business provides advertising agency services to both Chellomedia channels as well as external clients

• Accounts for ~50% of total Chello Central Europe revenues with Poland as accounting for 75% of total At Media salesNote: Figures assume exchange rate of 1.3x € to USD.(1) All data as of or for April 2013A YTD.(2) Pre eliminations.


Revenue By Genre

Revenue By Country (Channel

Business)

Revenue

’11 – ’13 CAGR: 10%’13 – ’18 CAGR: 4%

’11 – ’13 CAGR: (1%)’13 – ’18 CAGR: 3%

EBITDA

DRAFT – FOR DISCUSSIONChello Central Europe Strategic Rationale

• Chello Central Europe acquisition could help SPT Networks build out a very deep and wide channel portfolio - particularly in SPT Networks’ main markets of Poland, Hungary and Romania - that would have enough reach to build significant scale in ad sales and leverage over content sellers

• Movie-focused channels (MGM, Film Café, Film Mania), and the kids’ property, Minimax, would be of greatest interest. The strategic fit with Chello Central Europe’s sport channels is less clear, given the unknown element of costs of rights and operations

• The overarching strategy post-acquisition would be to keep the kids’ and lifestyle brands as they are, but convert most of the other existing brands into AXN Black/ White/ Spin/ Movies properties, maximizing distribution of all AXN brands and building a much cleaner, clearer brand portfolio

● In terms of the sports channels, there is some opportunity to build a pan-regional sports business that could acquire rights for the region at competitive valuations thanks to economies of scale

• In creating distribution width by providing a wide portfolio of channels that becomes a must-have for platforms, SPT Networks could secure higher long-term rates and carriage for SPT Networks channels

• If sufficient market share is built, SPT Networks could consider an independent ad sales play in Poland, Hungary and Romania to further increase our leverage with strategic ad sales partners in the region16

DRAFT – FOR DISCUSSIONChello Central Europe Channel Portfolio Strategy

17(1) As of April 30, 2013.

DRAFT – FOR DISCUSSIONChello Central Europe (excl. At Media) Preliminary

Valuation(US$ in millions)










Trading Multiples - FY14E EBITDA ■ Trading Multiple of FY14E EBITDA Range: 10.5x - 11.5x including a 25% Equity Control Premium


Transaction Comparables - LTM EBITDA (FY13E)

■ Transaction Comparables Multiple of LTM EBITDA (FY13E) Range: 11.5x - 12.5x

$203

$211

$198

$175

$180

$220

$229

$217

$210

$200

$100 $125 $150 $175 $200 $225 $250 $275 $300

Enterprise Value


At Media

DRAFT – FOR DISCUSSIONAt Media Overview

20


• At Media is the leading advertising sales house in Central Europe, representing leading TV channels in Poland, Hungary and Czech Republic

• Established in Poland in 1998 and grew significantly whilst also expanding into Czech Republic (2008) and Hungary (2010)

• Currently represents 101 international channels

• Services provided to Chellomedia channels account for less than 10% of total At media revenues and gross profit

• Whilst At Media’s core business is acting as a broker selling advertising time on TV as well as on internet and VOD, it also provides channel income optimization services to the channels it represents including sponsorship & promotion, consultancy on channel positioning, etc.


Revenue Breakdown by Country (1)(2)

Revenue

EBITDA’11 – ’13 CAGR: (18%) ’13 – ’18 CAGR: (5%)

’11 – ’13 CAGR: 2% ’13 – ’18 CAGR: 4%

Selected Represented Channels

DRAFT – FOR DISCUSSIONAt Media Preliminary Valuation

(US$ in millions)


• SPT Networks estimates a preliminary enterprise value range of $12mm-$16mm based on Chellomedia financial projections and by equally weighting the DCF methodologies and trading multiples

– The valuation implies 4.5x – 5.8X FY15 EBITDA







Trading Multiples - FY15E EBITDA ■Trading Multiple of FY15E EBITDA Range: 5.0x - 6.0x including a 25% Equity Control Premium$14

$11

$13

$16

$14

$19

$0 $5 $10 $15 $20 $25

Enterprise Value


Chello DMC

DRAFT – FOR DISCUSSIONChello DMC Overview

23


• Chello DMC provides advanced play-out and content management solutions to local and worldwide clients seeking to maximize the value of their content

• Acts as in-house engineering and broadcast operations centre of excellence for Chellomedia

• Services include play-out, VOD services, content management, and connectivity

• Currently transmits over 100 feeds across Europe, Middle East, Asia and South Africa

• Content delivery for VOD and OTT platforms with over 22,000 titles across 13 different regional platforms

• Also provides technical services that support UPC Direct, a DTH satellite TV platform, across Central Europe

• It operates an advanced and highly integrated media-handling and play-out system, using modern server technology

• Services offered to Chellomedia channels, Liberty Global and external third-party clientsNote: Figures assume exchange rate of 1.3x € to USD.

(1) All data as of or for April 2013A YTD.(2) Pre eliminations.

Select Customers

Chellomedia & Liberty Global

Services

Third-Party Services

Revenue

’11 – ’13 CAGR: 7% ’13 – ’18 CAGR: 8%

’11 – ’13 CAGR: 2% ’13 – ’18 CAGR: 3%

EBITDA

DRAFT – FOR DISCUSSIONChello DMC Strategic Rationale

24

• DMC has limited strategic fit with SPT Networks’ future plan for distribution infrastructure

• DMC’s headquarters is not ideal as SPT Networks has vetted Amsterdam in detail when exploring possible locations for our own MediaCentre and found that it was deficient in several areas as compared to other regions in EMEA

• The facility, workflow and operations are built around legacy technology while SPT Networks’ current strategy is to move operations to the cloud, ultimately making centralized network services facilities and infrastructures redundant

• SPT Networks has recently renegotiated and extended contracts until the start of FY18 with another network service provider in London for an additional 4 years, at highly competitive prices, while we architect the cloud solution

• However, DMC would likely be considered a valuable asset to other network services competitors (e.g., GlobeCast, RRSat, Encompass Digital Media), and could be a good source of monetization were we to sell it off post acquisition

• Potential conflict of interest with SPT Networks as the facility owner/operator as the majority of DMC’s customers are SPT Networks direct competitors, which will likely be problematic for service renewals

• A large portion of DMC’s business, ~56% of CY2012 revenue comes from related parties (i.e., Chello channels and Liberty)

• If we were to buy DMC from Liberty, we would have to secure long term service agreements

• Matters can be further complicated if we were to sell the business to a third party

• Relatively low projected growth suggests that we may not be able to replace current related parties if they were to discontinue the relationship with DMC once contracts end

DRAFT – FOR DISCUSSIONChello DMC Preliminary Valuation

(US$ in millions)



– The valuation implies 7.5x – 8.5x FY14 EBITDA and 6.6x – 7.6x FY15 EBITDA



DCF - Exit Multiple

■■



Trading Multiples - FY14E EBITDA ■ Trading Multiple of FY14E EBITDA Range: 9.0x - 10.0x including a 25% Equity Control Premium$85

$85

$75

$94

$95

$85

$30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130

Enterprise Value


July 2013 LatAm...MGM and Horror Channel • 10 channels with JV partners including 8 channels with...

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