1 Pro-Forma Ownership Structure Pro-Forma Ownership Structure News Corp. and Telecom Italia to Merge Stream and Telepiu to Create a Single Pay-TV 80% 80% 20% News Corporation News Corporation Creates Creates THE THE Pay-TV Platform Pay-TV Platform in Italy in Italy Italia Creates Creates THE THE Pay-TV Platform Pay-TV Platform in Italy in Italy Italia • Sole pay-TV platform in Continental Europe’s 3 rd largest economy • Rapid subscriber growth through elimination of piracy, compelling product and simplified offering • Leverages News Corp’s expertise in running pay-TV platforms • High value creation with limited upfront investment
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Italy Offers Significant Potential for a Italy Offers Significant Potential for a Single DTH PlatformSingle DTH Platform
Italy Offers Significant Potential for a Italy Offers Significant Potential for a Single DTH PlatformSingle DTH Platform
Source: Zenithmedia (July 2001); Italmedia Consulting/La Repubblica 4 July 2002, Kagan(1) Counts cable TV as one platform
• Largest untapped pay-TV market in Europe
• No cable industry to compete with
• Very low pay-TV penetration
• TV-centric culture focused on soccer
Italy UK
21.6M 24.5M
52% 30%
8 5
1 2
9% 38%
Television Households
% of advertising spent on TV
Free-to-air channels
Pay-TV platforms(1)
Pay-TV penetration (2001)
5
All Key Movies and Sports On A Single Platform
Italia
Basic Channels
Major Studios
Soccer Serie A
19 0% 9 teams
25 100% 9 teams
40+ 100% 18 teams
Merger Creates Single Premium Content PlatformMerger Creates Single Premium Content PlatformMerger Creates Single Premium Content PlatformMerger Creates Single Premium Content Platform
6
Unified Platform Will Eradicate PiracyUnified Platform Will Eradicate PiracyUnified Platform Will Eradicate PiracyUnified Platform Will Eradicate Piracy
Today:
• Estimated 2-3 million pirated signals in Italy which is approximately 50% of the market
• Telepiu easily hacked and smart cards were easily obtained
• Satellite dishes and decoder boxes are commonly sold without subscriptions
NDS Technology Will Combat Piracy
(1) Source Makro (Milan-based media institute), company reports
•19 additional basic channels for €4 extra per month•Hollywood movies•All football•More sports
•13 additional basic channels at no additional cost•Better Italian movies•All football•Wimbledon
•World class basic World class basic offering for offering for €26 per €26 per month month •Italian and Hollywood Italian and Hollywood moviesmovies•Complete sportsComplete sports
• Explore programming contract renegotiations upon expiration
• No reductions to existing contracts built into business plan – all upside
16
Elimination of PiracyElimination of PiracyElimination of PiracyElimination of Piracy
(1) Source Makro (Milan-based media institute), company reports (2) Source: Telepiu – introduced new programming package in August
• Estimated 2-3 million pirated signals(1)
• June 2002 Telepiu card swap resulted in:
• New sub additions at record levels
• Substantial upgrades to higher tiers
0
5
10
15
20
25
30
35 Telepiu New Sub Activations (’000s)(2)
Week Prior to Announced Termination of Old Telepiu Cards
June July August
2002
2001
17
Elimination of PiracyElimination of PiracyElimination of PiracyElimination of Piracy
• Sky Italia will convert all Telepiu subscribers to secure NDS conditional access system
• Pirate conversions will only require a smart card swap out – not a full set-top box replacement
18
• Increase in-house call centers• Utilize best practices from BSkyB• Common technologies of NDS• Data mining
0
7
14
21
2002 2003 2004 2005 20060
7
14
21
1998 1999 2000 2001 2002
Reduce Churn to 14.0% per year by 2006Reduce Churn to 14.0% per year by 2006Reduce Churn to 14.0% per year by 2006Reduce Churn to 14.0% per year by 2006
BSkyB Annual Churn % Sky Italia Annual Churn %
19
Increase ARPU to Increase ARPU to €€47 by 200647 by 2006Increase ARPU to Increase ARPU to €€47 by 200647 by 2006
• Effective up-selling
• Elimination of irrational discounting
• Standardized service and technology
• Deployment of easy to use new features
• Exclusive content that customers desire
• Video on Demand
• Focused advertising towards customer preferences