Slide 1

Investment in Maa TV Presentation to the Investment Committee July 24 th, 2012 DRAFT July 5 th, 2012 DRAFT FOR DISCUSSION ONLY Slide 2 2 SPE has an opportunity to expand beyond its current focus on Hindi-speaking markets and acquire a controlling stake in Maa TV, a bouquet of Telugu language channels in the Regional market Maa TV has grown rapidly and has recently overtaken ETV to become the #2 channel in Andhra Pradesh, a fast-growing region of Southern India Acquisition of Maa TV will provide strategic benefits to both SPE and to Sony Improves competitive positioning and brings SPE one step closer to a national India footprint Capitalize on the growth in ad revenues for regional language channels in Southern India, which is faster than the growth of Hindi language channels and diversify ad revenue to regions that arent affected by the same factors that affect the Hindi market Andhra Pradesh is the 2 nd largest regional C&S market in India and is expecting to grow at a 14%-16% CAGR for ad revenue and a 23%-25% CAGR for subscription revenue through 2015 Provide greater exposure for the Sony brand to almost 10% of the Indian population SPE is seeking approval to acquire a majority stake in Maa TV for INR 6.1BN ($111MM) with INR 5.9BN ($107MM) payable in FYE13 and INR 200MM ($3.6MM) payable in FYE15 Acquisition will be funded out of SPE/SPT cash flow NPV of $23MM, IRR of 17% and payback period of 11 Years Executive Summary DRAFT Slide 3 3 SPT Networks Growth Strategy The Indian TV market is critical to the continued success of SPT Networks India is expected to be one of the top 3 world economies by 2050, is currently the 3 rd largest TV audience in the world and is adding ~9MM households annually The media industry in India is forecast to grow at a 15% CAGR through 2016; television is expected to be a primary driver of this growth, with an expected 18% CAGR through 2015 Regional channels are key factors to ongoing success in India Higher forecast growth in ad revenues and per capita incomes than the Hindi market and greater combined viewership than the Hindi-speaking regions Zee and Star (News Corp) currently own 6 and 12 regional channels, respectively, versus SPEs 1 Adding regional channels to TheOneAlliance 1 partnership would strengthen our distribution bouquet, making it a more compelling offering in all parts of the country Re-branding Maa TV channels with the Sony name would allow Sony to better connect with approximately 10% of the Indian population, many of whom are striving to own higher-end brands SPEs existing India operations will drive strong growth in Maa TV MSM will manage Maas operations, narrow the pricing gap with its main regional competitor and realize efficiencies through economies of scale (i.e. decreased programming costs (2) and higher ad rate growth) Maas ad rates are lower than its #2 market position would suggest (INR 2,300 effective rate versus INR 8,200 for the #1 regional channel) Investment in Maa TV would be consistent with SPTs growth strategy and would be highly strategic to future growth and profitability 1 TheOneAlliance is a channel distribution joint venture with Discovery Communications (2) MSM will be able to provide Maa with access to its large content catalog to be dubbed into regional languages. Maa already purchases programming from MSM (in FYE12 Maa purchased CID for INR 18MM) DRAFT Slide 4 4 Opportunity for SPE in Andhra Pradesh Andhra Pradesh is a rapidly growing Indian state with substantial potential Andhra Pradesh, a Telugu-speaking region, is the 3 rd fastest growing Indian state State GDP is over $120 billion; government is targeting 10% growth for 2012 Regional population is becoming more affluent; per capita GDP in Andhra Pradesh has more than doubled since 2005 and is expected to grow 14% in 2012 (1) SPT/MSM management has the experience necessary to capture this growth potential AXN Latin America Since FYE02, management has grown revenue at a 15% CAGR and took EBIT from a loss to over $25MM in FYE13 budget Mystery Channel Management has increased revenue and EBIT at CAGRs of a 6% and 20%, respectively, since acquisition MSM Management has turned around MSM from a loss, more than doubled revenue since FYE09 and is now contributing ~$100MM in annual EBIT SAB acquisition Since FYE06 management has grown revenue from $6MM to almost $80MM and took SAB from an operating loss to more than $20MM in EBIT forecast for FYE13 (1) Press Information Bureau; Government of India and The India Brand Equity Foundation DRAFT Slide 5 Maa TV operates 4 channels in Andhra Pradesh, the second largest regional ad market in India Maa TV (GEC), Maa Music, Maa Movies and Maa Gold (formerly Maa Junior) Maa TV, the flagship channel, is currently the #2 channel in Andhra Pradesh, after recently passing ETV in ratings From FYE09 to FYE11 Maa TVs revenue increased by over 60% due primarily to increased sellout and higher advertising rates; EBITDA more than doubled over the same period Pre-transaction shareholders are N. Prasad (67.2%), other promoters and local celebrities (30.7%) and key employees participating in ESOP plan (2.1%) Overview of Maa TV 5 DRAFT ($MMs) RevenueEBITDA Note: Historical period is shown with unadjusted EBITDA and has been restated using a constant FX rate of 55 INR:USD Slide 6 6 Maa TV Deal Status Drafts of the Shareholder SHA and SPA exchanged SPE to acquire 52.3% of Maa TV for a total purchase price of INR 6.1BN ($111M), representing an enterprise value of INR 11.7BN ($212MM) SPE will acquire 51% of fully-diluted equity at close for INR 5.9BN (~$107MM) by purchasing shares from existing shareholders and assuming or repaying $9MM in debt Additional 1.3% to be purchased in FYE15 from employee stock option holders for INR 200MM (~$3.6MM) (1) Purchase price derived as 22x reported FYE12 EBITDA of INR 482MM ($8.8MM). (2) Maa TV performance year-to-date is on budget; FYE13 Q1 EBITDA is INR 138MM ($2.5MM) In terms of FYE13, multiple of acquisition is 21x EBITDA vs. 24x trailing multiple SPE will have a call option on the 47.7% minority position beginning on the 5 th anniversary of closing Call option will be for fair market value, determined by mutual agreement, or by independent valuation if agreement cannot be reached If SPE does not exercise its call by the 7 th anniversary of closing, minority shareholders can force a sale of 100% of the company to a third party DRAFT (1)Purchase price calculation based on multiple of FYE14 EBITDA (2)EBITDA figures presented reflect adjustments due to FYE12 non-operating income items Assumed FX rate of 55 INR:USD Slide 7 Source: Deloitte Valuation Third Party Valuation $257 $235 $195 $168 $144 Proposed SPE enterprise value ($212MM) for 100% ($MMs converted from INR at 55 INR:USD) Deloitte Touche Tohmatsu (D&T) was engaged to value Maa TV SPEs proposed purchase price is at the low end of the value that SPE or another strategic buyer is expected to derive from this acquisition of Maa TV Independent Fair Market Value Range 100% Value 7 At SPEs proposed price of $111MM (including $9MM debt assumption) for 52.3%, SPEs estimated post-tax IRR is 17% and payback is 11 years Notes: These comparables do not include ETV that would be considerably higher. Transaction comp includes Asianet-Star acquisition, adjusted for time since close. Public comps include Sun TV and Zee TV, both of which have operations in Andhra Pradesh Assumed FX rate of 55 INR:USD DRAFT $208 19.1x 16.4x 29.2x 23.6x 26.7x 22.2x Weighted Overall Value DCF Comps Public/Trans Slide 8 Financial Impact to SPE 8 EBIT Impact Acquiring a controlling interest will allow SPE to consolidate Maa TV and is expected to increase SPEs EBIT by over $20MM per year by FYE17 Cash Impact DRAFT (a) Assumes December 31, 2012 close (b) it is our intent to not pay dividends until $10MM in working capital is achieved on the balance sheet, after which dividends will be paid on 100% of cash available Cumulative cash flow break even estimated at 11 years Slide 9 Maa TV Financial Summary 9 All years for fiscal years ending March 31 st in Indian GAAP and exclude expected MSM inter-company transaction, management service and representation fees Excludes impact of proposed TRAI changes to television advertising guidelines (a) Assumes December 31, 2012 close and excludes $5MM in estimated transaction costs (b) Purchase Price of $212MM based on FYE12 reported EBITDA of $8.8MM plus assumption of debt; EBITDA adjusted here for changes to amortization policy in FYE12; Company changed its amortization policy in FYE12 and adjustment upwards was largely effect of moving a portion of show amortization to previous year. (c) Fair value analysis in progress. Purchase price amortization is estimated and may vary by >10% Forecasts are Preliminary DRAFT Slide 10 Cash Flow 10 (a) Assumes December 31, 2012 close (b) PPA analysis conducted by E&Y; intangibles include movie library, trade name, customer relationships, carriage agreements and supply agreements with useful lives of 3-10 years Based on 100% cash flow before dividends. DRAFT Slide 11 11 Regulatory Approvals This transaction is subject to regulatory approval by three different bodies Foreign Investment Promotion Board (FIPB) Reserve Bank of India (RBI) Ministry of Information and Broadcasting (MIB) Timing on regulatory approval is uncertain, but could be as little as 2 to 3 months after signing, and although unlikely, as late as 1 year after signature We will need an additional FIPB approval for 1.3% stake in FYE15 SPE purchase of 1.3% stake will be conditioned on receiving FIPB approval DRAFT Slide 12 12 Risk and Mitigation DRAFT RiskMitigation Downturn in Indian advertising market MSMs expanded footprint and premier client list insulates against this better than Maa TV or MSM stand-alone Channel growth slower than expected Key performance drivers relate to improving the programming, advertising sales, and channels distribution, which are areas of expertise of MSM management In addition, Maa TV can be a platform for the regional rollout of MSM franchises such as SAB and MIX Difficulties integrating with MSM leads to operational disruptions MSM proposes to keep existing Management in place and only slowly integrate Operations with the exception of distribution Evolving regulatory framework may reduce advertising minutes MSM management does not feel that the recent recommendations by the TRAI will be enforced SPE will need to receive FIPB approval to exercise our call option after year 5 We know of no specific reason why the FIPB would not approve the buy-up Slide 13 Next Steps 13 Seek approval from the Group Executive Committee Complete and execute long form documents Submit filings and obtain regulatory approvals Close DRAFT