Astro All Asia Networks, which runs Malaysia’s only direct-to-home (DTH) satellite television platform, is confident that it will continue to perform strongly despite the entrance of a new competitor in the Malaysian pay-TV market.

Analysts also believe the new entrant, MiTV, is unlikely to pose much of a threat to Astro, which has about 1.7 million subscribers in Malaysia.

“I don’t see MiTV making a big impact,” Kelvin Goh, media equity analyst at CIMB, said to Satellite News. “The content is not really relevant or compelling for Malaysians. What they have done is package a lot of second-tier programming and are hoping to sell it at a subscription rate of 68 ringgits ($18.20) a month. At the end of the day, it is not something that people really want to watch.”

Claire Chin, a media equity analyst at RHB Research, said, “I think, for the next two to three years, MiTV will at least have to build its brand name and presence. They also will have to prove to the local pay-TV viewers they are willing to invest to be a strong second player in the market. Astro, so far, has provided pretty good content and programming and has built its brand name over the years, so I don’t think the new player is going to make much of a dent in terms of Astro’s medium-term growth prospects.”

While Astro’s DTH service is likely to continue to show strong growth in terms of subscribers in Malaysia, the operator also has been looking at other opportunities. In March, the operator announced it was forming a joint venture with the Lippo Group to launch DTH services into Indonesia, a country with a population of more than 200 million people.

Like a number of pay-TV operators, Astro is moving away from core DTH services and looking at other platforms to deliver its content services. Astro is exploring opportunities in the mobile television space and recently combined with Maxis and Nokia to showcase mobile television over Digital Video Broadcasting – Handheld (DVB-H) technology in Malaysia. Astro also launched a broadband TV portal this year.

With international expansion on the agenda, more competition at home as well as opportunities in mobile and broadband, it is a busy time for Astro. In an interview with Satellite News International Editor Mark Holmes, Astro COO David Butorac outlines the company’s main ambitions during the next few years.

Satellite News: How many subscribers do you now have in Malaysia? What levels of growth are you looking for in the next year?

Butorac: We were at 1.696 million [at the end of July], which is 32 percent of the Malaysian population. We are seeing an accelerated growth at the moment. In the last 12 months, we have added more than 300,000 net subscribers. We have seen strong growth in this time and our expectation is to add 250,000 to 300,000 net subscribers per annum over the next few years. At 32 percent, we still have a fair degree in headroom in terms of penetration and we expect to see it to continue to move forward. We are not seeing any ceiling and certainly there has been an accelerated demand over the last couple of years, and we expect it to grow for several years to come.

Satellite News: You had planned to launch personal video recorder (PVR) services in mid 2005. Were you able to do that?

Butorac: We are in the process of finalizing our Digital Multimedia Gateway (DMG) strategy. We are currently anticipating launching the service in the middle of next year, as we are waiting for the launch of the new satellite and capacity. The technology specifications have been completed. We are just in the process of finalizing the set-top box manufacturer. It is an important product for us, and we are moving on with it.

Satellite News: What is the market for high-capacity PVR boxes in Malaysia?

The DMG will have a 160-gigabyte drive and will revolutionize television in this market, as they have in every market in which they have launched. The challenge is for the consumer to gain an understanding of the concept but, once this is achieved, we see it as the future of broadcasting in our market. The specification we will bring to the market will be a high-spec box with a fairly large hard disk drive and advanced functionality to cater to both now and the future. Increasingly in-home digital devices will expand beyond pure television devices, and we intend the Astro Digital Multimedia Gateway to embrace such future opportunities.

Satellite News: What business model are you planning for your PVR?

Butorac: We would anticipate there being a retail component to the box. We currently subsidize our existing set-top box. If we just subsidize the new box to the same extent, there would be a retail component, but not at an unmanageable price. The cost will certainly be lower than the price of the Astro existing spec box when that first came to the market place.

We haven’t finalized the model of how we will monetize the platform, but it is important for anti-churn, for delivering a range of new services as well as creating incremental ARPU [average revenue per user]. It is not just a matter of generating new top line revenue straight off the box. There are other strengths and aspects to the product that creates the economic rationale, and churn reduction is clearly one of them.

Satellite News: Some satellite pay-TV operators such as Premiere are using PVRs to deploy a push video-on-demand service. Are you looking to do something similar?

Butorac: We would certainly like to push content onto the hard disk with particular genres and particular programs. As we release new content on a pay-per-view model, we would anticipate building out to the extent of using push. Whether or not you can have the functionality from day one will depend on the speed in which we can get to market. But it is certainly going to be important in terms of the business model in the future.

Satellite News: What are your plans to develop mobile television services?

Butorac: We recently undertook a DVB-H demonstration, which showcased the potential for the technology. We are very keen to work with many and varied distribution means. We are not at all wedded to DTH satellite as our only distribution path although we do recognize that DTH will always be our predominant distribution.

To that end, we are interested in the developments of mobile television and other distribution means. We are involved with both of the licensed [third-generation wireless] providers in Malaysia in order to aggregate our rich content and we have already launched our own broadband TV site where customers can get additional content, which is collaborative with the broadcast service.

We see the development of new distribution means being quite collaborative to our business and mobile television is just one of them. We are in discussion with the Malaysian government about spectrum and understanding its views on the rollout of services, but we aim to be at the forefront of all of these type of services. We have rich content and partnerships with content providers, and we have always been at the forefront of technology advances in Malaysia and we aim to continue to do that.

Satellite News: The launch of high definition (HD) television services on satellite is beginning in Europe. What is Astro doing in this area?

Butorac: We don’t have a specific timeline related to HDTV. I think you have got to recognize that in the emerging markets, we are still transmitting 4:3 pictures. We are not transmitting widescreen yet, but HDTV will come. The technology is spectacular, but it is not a cheap technology. In emerging markets where household incomes are lower, the propensity to launch those sort of services will be lower. For example, in many markets the majority of the television sets are still black-and- white, and thus the transition to color and widescreen will be a priority.

But it will come. I don’t think it will be as fast as Europe. I think the United States has launched into HDTV because, to be perfectly honest, from a quality standpoint, they have never had high-quality television with [the National Television System Committee standard]. There is more of a quality imperative there, but less so in the [Phase Alternating Line] markets, where the digital quality of services such as Sky Digital has been quite astounding. But, sports broadcasting in HD will be spectacular. You will see probably a shift in the perception of HD with the Beijing Olympics, which are going to be delivered entirely in HD. That will certainly provide a focus for a lot of markets.

Satellite News: What are your plans for the Indonesian pay-TV market?

Butorac: We see Indonesia as a great opportunity. If you look at the penetration of multichannel in Indonesia, it is relatively low by comparison to other markets, our own included. We are embarking on a joint venture with the Lippo Group, which operates Indonesia’a largest multichannel operator, Kablevision, and will be launching a DTH multichannel Astro-branded service in the coming months. We see it as a very exciting proposition and we are actively involved in building up the business. We have started to deploy our teams on the ground in Indonesia. We have several tens of thousands of set-top boxes that are ready to go into the market and we are gearing for a launch in the coming months.

The strength of Astro to date in Malaysia is that we are a multi-ethnic, multilingual broadcaster and Indonesia provides a great opportunity to leverage our core competencies into a similar market. Current penetration of multichannel services in Indonesia is less that 1 percent and we see a great potential in providing a quality service for the whole of the country. We intend to offer a wide range of dedicated local and international channels and aim to be operational by year’s end.

Satellite News: Are you looking to become a regional DTH operator and look for other markets outside of Malaysia and Indonesia?

Butorac: Our intention is to broaden our company throughout the region wherever appropriate opportunities arise, be that platform, such as Indonesia, or content opportunities in our and other markets. The company floated in October 2003, and our stated plans were to be able to use the strength of our financial position to grow our businesses as appropriate.

We have recently embarked on a number of joint ventures. We have announced a joint venture with UTV in India for the production of children’s channels for Malaysia and Indonesia. We have announced with a joint venture with Sun Networks in India for the aggregation for the rich Tamil content they produce in that market and beyond. We recently launched the highly successful Sun Networks Channel into our Malaysia market with excellent results. We also have recently announced a joint venture with NDTV (New Delhi Television) with a view to creating news channels for Indonesia and Malaysia. We have recently acquired a controlling stake in Goal TV, a company that has two football- orientated channels based out of Hong Kong. We continue to expand Celestial’s operations in Hong Kong targeting the Chinese speaking markets worldwide.

Growth around the region is an important aspect for Astro, both from a content proposition and from a platform position. We can be a platform in some markets and, in markets where we can’t be a platform, we aim to participate from a content perspective and grow the overall strength of the business

Satellite News: How do you see the digital television landscape changing in Malaysia during the next 12 months?

Butorac: We will continue to grow domestically and internationally in all aspects of our business. We certainly aim to grow the service to appeal to more and more subscribers in Malaysia and Indonesia. With new satellite capacity in Malaysia, we will be adding a whole raft of new interactive services as well as new content services. This time next year, we will have in excess of 100 channels on air and be offering of new ways of experiencing television. These are very exciting times for the company.

(Catherine Chin, ASTRO, catherine_chin@astro.com.my; Kelvin Goh, CIMB, Kelvin.goh@cimb.com.my; Claire Chin, RHB Research, Kcchin@rhb.com.my)