TV Sul (aka TVCI) Overview

July 2013

SPT has an opportunity to be the first network to launch a movie channel on Open TV in Brazil

Opportunity is presented through partnership with a local FTA UHF Network Station (TV SUL)– TV SUL was founded in 2007 and is currently renting it’s UHF signal to a local religious group in Brazil

Two different possible partnership structures: 30% ownership stake or License Fee agreement– SPT to develop and manage movie channel. SPT would be responsible for 100% of channel cost and Ad Sales

– TV SUL to manage network structure and be responsible for 100% of Network costs and FTA programming requirements

Estimated purchase price of US$33M to acquire 30% of TV SUL or a monthly fee of: US$450K + 10% Rev Share to license signal

SPT recommended Required Revenue levels– Based on $(0)NPV IRR of 10% not inclusive of exit value. Based on first year Revenue of $9.7M

– License fee Scenario: Cash- flow breakeven in 5 years and accumulated cash-flow breakeven in 8 years not inclusive of Exit Value

– 30% Acquisition Scenario”: Cash- flow breakeven in 4 years and accumulated cash-flow breakeven in 8 years. Cumulative Break even excludes both: cash disbursement for 30 % acquisition during Pre-Launch and Exit Value.

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Executive Summary

Brazil – FTA Market Overview

3Source: Americas TV 16th Edition, newsruns and company disclosures.

Brazilian FTA Market is dominated by 5 major players, a partnership with a small UHF network represents a potential opportunity for growth as well as a strategic opportunity to acquire UHF signal.

DTT technology is transmitted via UHF, according to Brazilian Government DTT will replace 100% of Analog technology by 2019

Brazil has 5 major free-to-air channels. Globo is the dominant TV player, owning the top terrestrial network.

FTA programming schedules are filled mainly with local content, particularly telenovelas

Foreign imports mostly consist of deals with major studios and are aired outside of primetime

Globo is the 4th largest television network globally with an audience of over 120 million viewers per day

Major Brazilian producer of content, producing over 5,000 hours of programming (soap operas, dramas series and sports) per year

SBT, the second-ranked player, has 110 owned and affiliated stations

TV is the main advertising medium, representing 70% of the total advertising market in 2012

TV Sul Overview

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• TV Sul (known as TVCI) is a Brazilian television station with 3 UHF broadcast stations and retransmission stations in: Paraná, Curitiba, Francisco Beltrão, Londrina e Maringá, Florianópolis, Porto Alegre, São Paulo, Brasilia, Salvador and Belo Horizonte.

• Inaugurated in 2007 by “Grupo Massa” and acquired by Paulo Pimentel Group in 2010• Privately owned by Marcos Antonio Alberti and Ademar Euclides Monteiro

• TV Sul’s plan is to reach most of the Brazilian population by segmenting Brazil into 5 macro regions; with a special offering to the Sao Paulo market.

• Plan requires acquiring 3 additional broadcast stations and retransmission stations in the major hubs of Brazil.

• Broadcast stations to support local adverting and retransmission stations to support reach expansion.

• RTV systems (interactive TV) in the 50 major cities of Brazil and Contract with Digital Satellite Star One C2

• Qualify for Must carry and estimates an additional 10MM households on Pay TV

• Two additional broadcast stations to cover Rio de Janeiro in the next 2 months• Recently acquired an analog satellite Star One C2 with plans to acquire a Digital satellite(no

dates provided) • Expect additional 18MM households with Star one satellites

Description

Strategic Plan

Strategic Plan (Recent

Developments )

TV Sul Business Plan Assumptions

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• TV Sul UHF signal currently reaches 21MM households. Assumes 3% growth every year. (This assumption takes in consideration expansion plan on both UHF and Pay TV)

• TV Sul expects additional 18MM households from Satellites C2 Star one (Analog and Digital) starting 2014

• No overlap considered for households estimations under the 2 platforms

• Assumes 1st year revenue of $9.7M , growth rate varies according to cost from each scenario• Revenue growth rates are determined to set a revenue level that would generate an IRR of 10%

• Programming: Assumes 150 titles for first 3 years with 3 daily reruns, 8 hours of content per day and 10 reruns per year. Assumed 200 titles for FY 18 to FY 24 with 3 daily reruns, 8 hours of content per day and 7 reruns per year and cost per title estimated at USD$40k. Estimated on air cost in $500k per year.

• Network Cost: $270k/Month. Applicable to acquisition scenario only• Acquisition Cost: Assumes 30% acquisition = R$75MM (USD$33MM) based on company value of

RS$250MM (USD$113MM) . Applicable to Acquisition scenario only)• License fees: $450k/ Month + 10% Rev Share (Inclusive of Network ops costs). Applicable to

License fee scenario only)• Marketing: Assumes fixed amount for the first 3 years ($7M, $6M, $5M and 10% moving

forward • Selling Cost : Assumes 5% Ad Sales commission + salaries for new sales team or 20% Ad Sales

commission for 3rd part sales team + No salaries. Assumed Bonus of 15% for all Scenarios. • HC & Salary: HC increase from 18 on year 1 to 27 on year 10

Distribution

Revenue

Costs

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TVCI $3.3 $5.2 $7.0 $8.7

Investment Scenarios/ Ad Sales Revenue ComparablesNeeded Sales (USD$ in MMs)

Note: • TVCI Ad Sales projection: Provided by Internal SPT Ad Sales Team.(Assumed 15% growth after FY 17)• SET, AXN and SPIN: MRP projections for Ad Sales Revenue (Assumed 15% growth after FY 17) • Abril: Projections based on 2012 Net ad sales revenue presented on Information Package from JPM with 15% growth rate• TV Cultura and Mix TV: Projections based on current revenue estimation provided by Mauricio Kotait with a 15% growth

rate• MGMM & EUROPA EUROPA: Projection based on 2015 Total Ad Sales Revenue provided by Chellomedia with 15% growth

rate. Ad Sales break out per Channel is based on number of subs. MGM 26MM and EUROPA EUROPA 8.7MM

SET $13.5 $16.6 $19.9 $35.9

AXN $11.2 $14.5 $16.9 $29.8

SPIN $.8 $.8 $.8 $2.1

ABRIL $22.3 $25.7 $29.6 $59.3

TV Cultura $9.3 $10.7 $12.3 $24.7

Mix TV $3.1 $3.6 $4.1 $8.2

MGM $3.7 $4.3 $4.9 $9.8

EUROPA EUROPA $1.2 $1.4 $1.6 $3.1

Ad Sales projection (USD$ in MMs)

Ad Sales Revenue Comparables:

Investment Scenarios FYE15 FYE16 FYE17 FYE24

1st Scenario $9.7 $12.3 $15.7 $85.5

2nd Scenario $9.7 $12.6 $16.5 $105.6

3rd Scenario $9.7 $13.0 $17.6 $140.7

4th Scenario $9.7 $13.4 $18.6 $183.4

Investment Scenarios:

• Scenario 1: 30% acquisition = R$75MM (USD$34MM) based on company value of RS$250MM (USD$113MM) + 0 License fee + 0% Rev Share. (Not inclusive of Broadcast ops cost). Assumes hiring a new sales team for FTA channel only. Based on 10% IRR not inclusive of Exit Value

• Scenario 2: 30% acquisition = R$75MM (USD$34MM) based on company value of RS$250MM (USD$113MM) + 0 License fee + 0% Rev Share. (Not inclusive of Broadcast ops cost). Assumes 3rd part Ad Sales team to paid on commission basis only. Based on 10% IRR not inclusive of Exit Value

• Scenario 3: License fee: R$1MM (USD$452k) + 10% of Rev Share (inclusive of Broadcast operational cost). Assumes hiring a new sales team for FTA channel only. Based on 10% IRR not inclusive of Exit Value

• Scenario 4: License fee: R$1MM (USD$452k) + 10% of Rev Share (inclusive of Broadcast operational cost). Assumes 3rd part Ad Sales team to paid on commission basis only. Based on 10% IRR not inclusive of Exit Value

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Strategic Rationale/ Summary of Proposed Deal Structure

Opportunity for cross promo, national and local advertising

Potential expansion trough Satellite (C Band) and to Pay TV if channel qualify as “Must Carry Channel”

Potential for RTV systems (interactive TV/ DTT) and Contract with Digital Satellite Star One C2

Any option to proceed with TV Sul, must at minimum meet the revenue thresholds to generate an IRR of 10% not inclusive of Exit Value

Based on the investment options, the revenue thresholds needed for a FTA channel are much higher than projections provided by internal SPT Ad Sales

STP management team understands there is a significant difference between Pay TV and FTA TV markets however no case study was found to support that conclusion

A special UHF Antenna is required for UHF signal reception. There is no data available on number or households currently equipped with UHF Antenna therefore it is not possible to measure the impact on total audience.

DTT signal is transmitted via UHF.

– Households need to be equipped with UHF Antenna in order to receive DTT signal.

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1st Scenario: 30% Acquisition / Hire FTA Sales Team

Note: Cumulative Break even excludes both: Cash disbursement from 30 % acquisition during Pre-Launch and Exit value.

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2nd Scenario: 30% Acquisition / Contract 3rd Part FTA sales team

Note: Cumulative Break even excludes both: Cash disbursement from 30 % acquisition during Pre-Launch and Exit value.

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3rd Scenario: License fee / Hire FTA Sales Team

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4th Scenario: License fee / Contract a 3rd part FTA Sales Team

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• Review different Scenarios with Russell • Review PPT with Niccoli to see if possible to reach Revenue thresholds

Next Steps