10 March 2006

Galaxy Satellite Broadcasting, the second smallest of four pay-TV operators in Hong Kong, said its distribution agreement with PCCW's NOW Broadband TV could help it break even on an operating basis by next year, 12 months ahead of forecast.

Galaxy, controlled 51 percent by ITC Corp chairman Charles Chan, could start to report positive earnings before interest, tax, depreciation and amortization next year, said chief operating officer Jackey Chan. The company previously said the milestone would be reached in 2008.

Galaxy had net losses of HK$440 million last year, according to estimates by investment bank Goldman Sachs. Television Broadcasts, Hong Kong's dominant terrestrial TV operator, owns 49 percent of Galaxy. ``By distributing our services through NOW, we will be able to achieve savings in the costs of set-top boxes and installation fees,'' Chan said.

Galaxy, which had 65,000 subscribers at the end of last year according to Goldman Sachs estimates, needs about 300,000 subscribers to achieve positive EBITDA, said Chan. He declined to disclose the latest subscriber numbers.

Galaxy, which now distributes its services via satellite, and Hutchison Telecommunications International's broadband network agreed last month to make some of its programming available to subscribers of NOW, which had previously been regarded as a competitor. The new alliance increased the threat to market leader i-Cable Communications, analysts said.

"Galaxy gets access to greater distribution at far lower costs,'' said Vivek Couto, director at research firm Media Partners Asia. At the end of last year, NOW Broadband had 350,000 paying customers out of a total 530,000 households that are capable of receiving its services, according to MPA estimates.

"[Galaxy] will give NOW the depth in local programming content that it didn't have and neutralize one of the main advantages held by i-Cable,'' Couto said.

Galaxy could unveil the new services to NOW users as early as next month, Chan said, if the co-operation agreement receives government approval. It would do so under a new brand, TVB Pay Vision, after the company said Wednesday it will stop marketing its services under the Supersun brand.

"As we will be supplying 20 channels to NOW, instead of the 42 that we provide to our current customers, users subscribing through NOW will be charged a lower price,'' Chan said.

Source : The Standard.