Some banks eager to finance digital
The imminent auction of broadcasting licences for 24 commercial digital television channels could be a boon for banks, but popular programmes and a large viewer base will make a stronger case for operators when they apply for a loan.
Vasin Vanichvoranun, executive vice president of Kasikornbank, said his bank was discussing with several potential bidders about opening letters of credit and credit lines.
Digital TV will spur investment in networks and content production, for which KBank has estimated the total investment value of at about Bt100 billion.
KBank aims to finance both the new operators of digital TV channels and contractors such as production houses and network vendors.
The financial status of channel operators and their partners is a key consideration. Content providers are important because strong programming ensures healthy advertising revenue.
"In the first step, bidders have to prepare capital for the auction and if they win [a channel licence], that means they will want a bank loan to strengthen their businesses and competitiveness," Vorakan Dhepchalerm, first executive vice president for corporate banking at CIMB Thai Bank, said yesterday.
CIMB is in talks with some potential bidders about financial support. It will consider their strengths including experience, content production and viewer base because those factors will guarantee advertising revenue, he said. The coming of the Asean Economic Community in 2015 is stimulating ad spending by foreign product owners, which will consider buying airtime depending on content and audiences, he added.
However, some banks express doubts about the revenue-generating potential of digital TV because of the increase in channels.
A source at Krungthai Bank said the revenue picture for digital TV was unclear. Questions remain about whether the billing rates will be similar to the rates of analog TV and whether the rates of the existing free-TV stations and the new players will be the same.
"In the bank’s view, even though we know that digital TV is an opportunity for lending, we should know what the key success factors for digital TV are and the business plans of the borrowers before considering giving a loan," the source said.
Low leverage and sufficient cash flow from other businesses are the key marks of a strong channel operator, and those players are the priority targets for banks.
"Companies with high D/E [debt to equity] and low cash flow might be too risky as long as we have not seen the clear revenue-generating power of this business," the banker added.
