ANNOUNCEMENT ASTRO TO BURSA MALAYSIA

General Announcement
Reference No AA-080903-62118
Company Name : ASTRO ALL ASIA NETWORKS PLC
Stock Name : ASTRO
Date Announced : 04/09/2008
Type : Announcement
Subject : ASTRO ALL ASIA NETWORKS plc ("AAAN") - PT DIRECT VISION
Contents : 1. We refer to the query from Bursa Malaysia in relation to an article in
The Star on 2 September 2008 entitled “Astro caught in a hurricane” and
another article in The Edge on 1 September 2008 entitled “A Grand
Alliance Crumbles” and wish to clarify as follows.
2. On 18 August 2008, AAAN and its affiliates (“Astro”) issued
termination notices to PT Direct Vision (“PT DV”), PT Ayunda Prima
Mitra (“PT APM”), a shareholder of PT DV and PT First Media Tbk (“PT
FM”), the holding company of PT APM (PT APM and PT FM are
collectively referred to as “Lippo ”) with respect to all support and
services being provided to PT DV, giving notice of the cessation of such
support and services. Simultaneously, notice was given that the
Trademark Licence Agreement entered into by PT DV with an AAAN
affiliate will not be renewed on its expiry on 31 August 2008.
3. These actions were undertaken after invoices for support and services
amounting to approximately RM805 million (including interest on all
outstanding amounts due since March 2005) that were sent to PT DV had
not been settled todate. The termination notices require PT DV to make
full payment of all outstanding amounts within fourteen days (i.e. 1st
September 2008) failing which Astro will have the right to terminate all
support and services immediately.
4. However, pursuant to requests by PT DV, Astro has as a gesture of
goodwill and in good faith agreed to continue providing support and
services at a cost of approximately RM20 million and granted an
extension of the Trademark Licence Agreement for a further period of
thirty days expiring on 30 September 2008 to enable PT DV to make
alternative arrangements to mitigate the impact on its customers.
5. In 2004, Astro was invited by Lippo to become its strategic partner in
PT DV(which proposed to provide multi-channel digital satellite paytelevision
and multimedia services in Indonesia under its multimedia
licence) given Astro’s industry leading expertise and established
implementation track record. Additionally, Astro was committed
toinvestin the development of the Indonesian television programming and
digital content (“Content”) industry. Astro and Lippo entered into a
Subscription and Shareholders Agreement on 11 March 2005 (“SSA”) for
the establishment of a joint venture to operate a pay-TV business in
Indonesia through PT DV, a company wholly owned by Lippo and its
Page 1 of 4
http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/48256E5D0010... 9/9/2008
affiliates (“Indonesian Venture”). The SSA sets out the capital
requirements to develop the satellite pay-TV business which was to be
funded through equity contributions by Astro and Lippo in proportion to
their respective proposed shareholding interest of 51:49% and external
funding, and the execution of commercial service agreements with Astro
for broadcasting services, information technology services, satellite
reception equipment lease and channel supply services. The Indonesian
Venture as set out in the SSA received the approval of the Foreign
Investment Board in Indonesia (“BKPM”) in May 2005.
6. On 26 August 2005, the Indonesian Government issued regulations
requiring all broadcasters, including those holding multimedia licences
such as PT DV, to apply for Izin Penyelenggaraan Penyiaran (Broadcast
Licence) under the Broadcast Law which limits foreign equity
participation to 20%. As a consequence, the parties entered into further
discussions to restructure the Indonesian Venture to comply with the
requirements of the Broadcast Law.
7. Pursuant to an application made to BKPM for the revised structure in
compliance with the Broadcast Law, BKPM approval was received in
December 2005. PT DV had also received confirmation from the
regulatory authorities that it can continue to operate under its existing
licences and approvals while the application for a new broadcasting
licence is processed under the Broadcast Law. Consequently, Astro
agreed with the full launch of the satellite pay-TV business on 28
February 2006 under the brand name “Astro Nusantara” through PT DV
utilizing a trademark licence granted by an AAAN affiliate.
8. Based on the executed SSA which sets out all the principal terms on
which the Indonesian Venture is to be developed and funded and the
receipt of requisite regulatory approvals for the commencement of the
satellite pay-TV business, Astro had every reason to believe that any
outstanding detail would be satisfactorily resolved in the spirit of
partnership and in good faith and that the revised joint venture agreement
to comply with the Broadcast Law and the commercial services
agreements would be executed to give effect to the Indonesian Venture. In
reliance on this, and consistent with its obligations as contemplated in the
SSA, Astro had incurred substantial expenses to develop and expand PT
DV’s satellite pay-TV platform in Indonesia.
9. However, in June 2006, Lippo indefinitely postponed the finalization of
the revised joint venture agreement and the commercial services
agreements citing as the reason a matter totally unrelated to the
Indonesian Venture. As at 31 July 2006, the total amount that Astro had
invested in the Indonesian Venture was approximately RM157 million.
10. Nonetheless, Astro continued in good faith to support PT DV in its
operations in the reasonable expectation that agreements would be
concluded with Lippo within a short period. However, even though the
unrelated matter appeared to have been resolved by April 2007, Lippo did
not take any steps to conclude and execute any of the agreements relating
Page 2 of 4
http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/48256E5D0010... 9/9/2008
to the Indonesian Venture.
11. On 1 May 2007, Astro had advised Lippo that unexpected delays in
procuring the requisite licences including meeting the conditions
thereunder and concluding the agreements relating to the Indonesian
Venture have led to an increase in the funding that was required to roll out
the satellite pay-TV platform as envisaged by the parties. On 9 May 2007,
Astro received a letter from a Lippo affiliate which stated that the SSA
had ceased to have any effect and all draft agreements on the Indonesian
Venture negotiated up to that date have “become irrelevant and/or have
become superseded by events”. At this time the permanent Broadcast
Licence, the procurement of which was a Lippo obligation, remained
outstanding.
12. Consequently, the Directors had decided that Astro would no longer
equity account for its investment in PT DV with effect from 31 July 2007
at which time Astro’s investments in the Indonesian Venture amounted to
approximately RM334 million. The Directors had also elected for Astro to
continue providing services to enable the parties to seek a mutually
acceptable solution at a cost of approximately RM20 million a month
primarily for procuring local and international television programming. In
this regard, Astro had on various dates announced that it had provided
services in the aggregate amount of a further RM203 million bringing the
total amount invested in the Indonesian Venture as at 30 April 2008 to
RM536 million.
13. In good faith and despite Lippo’s unwillingness to conclude all
documentation in relation to the Indonesian Venture, Astro has been
providing broadcasting services, information technology services, satellite
reception equipment lease and channel supply services to PT DV to
develop a satellite pay-TV business in Indonesia from a start up operation
to a business with a subscriber base exceeding 100,000 (or about a 20%
market share) in less than 2 years. Astro has also incurred some RM200
million to develop the Content, consistent with the commitment made by
Astro to work with the Indonesian production industry to create and
aggregate informative, educational and entertainment programming for
distribution in Indonesia, and to provide a window to Indonesian culture,
talent and heritage to an international audience.
14. Todate, Lippo has not contributed towards the funding needs of PT
DV and all the investment and operating costs incurred by PT DV in
developing its satellite pay-TV business have been met and supported
solely by Astro.
15. In developing the Content, Astro has contracted with PT Adi Karya
Visi (“PT AKV”)to originate and produce programming content that is
now aggregated into 6 television channels which is distributed exclusively
by PT DV in Indonesia. Of the amounts due to PT AKV for these
services, a sum equivalent to USD 16.2 million was paid by Astro through
PT DV to PT AKV. This payment is now the subject of a police report
made on behalf of PT APM in which spurious allegations of
Page 3 of 4
http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/48256E5D0010... 9/9/2008
© 2008, Bursa Malaysia Berhad. All Rights Reserved.
embezzlement, fraud and money laundering were made against certain
directors and employees of PT DV, Astro and PT AKV.
16. As it became clear that Lippo was not interested in concluding the
Indonesian Venture and, additionally, has now suggested that a third party
take over the interest of Lippo on terms that are totally unacceptable,
Astro has decided to no longer support the development and operations of
the multi-channel digital satellite pay-TV business by PT DV and
terminate the provision of all support and services and withdraw the use
of its trademark. Lippo has reacted to Astro’s decision to withdraw
support by threatening to make a substantial claim against Astro. If Astro
receives notice of any proceedings, it will make the appropriate
disclosures. The Board is closely monitoring the situation and will take
the necessary action to safeguard Astro’s interest.
17. In any event, Astro remains committed to supporting the development
and aggregation of local content in Indonesia for the Indonesian and
export markets.
18. All expenses incurred by Astro in providing support and services to
PT DV in relation to the Indonesian Venture have been accounted for in
the published results of AAAN and as disclosed in previous
announcements, AAAN expects to account for further costs relating to
specific commitments made in relation to PT DV operations of
approximately RM200 million.
This announcement is dated 4 September 2008.
Announcement Details :
Page 4 of 4
http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/48256E5D0010... 9/9/2008