Trading update

9 Dec 2009 15:59



Cellcast plc

("Cellcast" or the "Group")

Trading update

Cellcast plc, the interactive digital broadcasting company, is pleased to provide the following trading update on the Group's activities.

India

Cellcast's 37.5% associated company in India, Cellcast Asia Holdings ("CAH"), is experiencing a strong and profitable second half performance in 2009. The scope of its interactive format development expertise combined with its billing network means that CAH is becoming the partner of choice for many Indian broadcasters (for example it handled all the games and competitions for the IPL 20-20 Cricket, which is the largest sporting TV event in the Indian subcontinent).

Total mobile penetration in India exceeds 530 million subscribers making it the second largest market in the world after China (and 8 times the size of the UK subscriber market). India is still adding over 10 million new mobile phone subscribers every month which means that the market for Cellcast's applications and services is growing exponentially as demonstrated by the fourfold increase in revenues that CAH achieved in the period from January to September 2009.

CAH is now a clear leader in the participation TV sector in India both by traffic volume and revenue, and the company is well positioned for significant growth as sector leader in a market that is continuing to grow very rapidly.

UK

At the time of the 2009 interim results announcement in September, we reported that although the economic downturn continued to present major challenges to the media and entertainment industry, the Group would continue to invest in expanding distribution of its services through additional digital platforms, and that this would remain a core element of management's strategy for returning the Group to profitability. With this objective in view, Cellcast has continued to invest substantially in securing new distribution outlets for services on both Freesat and more specifically on Freeview. 

Freeview is now the provider of digital TV on the main set in 10 million UK homes, with a growing number of viewers taking up the service as the switchover from analogue gathers pace around the country. Research has shown that a substantial majority of viewers switching from the old five-channel analogue set-up were choosing Freeview's digital terrestrial TV service over BSkyB's satellite and Virgin Media's cable subscription services. More than 18 million UK homes now use Freeview on at least one of their TV sets.

During the second half of 2009. in line with the strategy described in our interim announcement, the Group, in association with its partners, has invested in securing contracts to provide services on 4 new channels on Freeview and one on Freesat with an additional 2 positions secured for launch. This commitment involved incurring substantial front-end costs, but our ability to seize this unique opportunity provides key strategic distribution and the long term competitive benefits derived from securing key channels to market across all major digital platforms, namely Sky, Freeview and Freesat. We anticipate the costs of this investment will be recouped from revenues in the second half of 2010 but will have a negative impact on the Group's second half 2009 performance to the extent that such costs cannot be capitalised under current IFRS rules. In the closing months of 2009, revenues from new distribution are already indicatively tracking above our internal projections and our expectation remains that the Group will still report year-on-year revenue growth compared to 2008. Ofcom

In the 2009 interim results announcement, we reported that the Ofcom review of the participation TV sector continued and was not expected to be concluded until some time in 2010. Since then, Ofcom has issued a further consultation regarding changes to the Broadcasting Code rules for promotion of premium rate services. Although there are still outstanding issues requiring clarification, overall, the Company and its advisors believe that Ofcom's recently published position is significantly more positive than originally indicated. 

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