Correct
13-02-2007, 10:44 PM
• As of December 31st 2006, Sogecable reaches 2,044,000 DIGITAL+ subscribers, adding more then 38,000 new net clients in the quarter. In 2006, subscriber growth has been resumed and 84,000 new net subscribers have joined the service within the year.
• 2006 ends giving Cuatro an average audience share of 7.2% in the month of December. Showing a growing trend, the annual average rate states at 6.4%.
• In 2006, Sogecable’s Net Turnover hits record figures reaching 1,654.7 million euros, up 9.3% year-on-year. Increases in both DIGITAL+ subscriber revenues and Cuatro advertising turnover have been the main drivers of growth in the year.
• Sogecable’s EBITDA reached 209.2 million euros in 2006. The pay television activities carried out an EBITDA of 308.0 million euros and Cuatro showed operational losses of 98.8 million euros.
• As of December 31st 2006, Sogecable’s net bank debt stands at 1,004.6 million euros, in comparison to 1,016.8 million euros withdrawn at the end of 2005. In 2006, Sogecable has been able to finance the first year of operations of Cuatro with no bank debt resources.
Javier Díez de Polanco, CEO of Sogecable, stated: “2006 stands as a relevant year for Sogecable’s activities. DIGITAL+ hit two million subscribers and resumed subscriber growth. After years involved in the reorganization of pay television activities and different processes of migration of subscribers, DIGITAL+ has managed to show again net growth of its subscriber base. And this happened in every quarter of the year. This shows its excellent position to benefit from the future growth that this sector will continue to enjoy in the Spanish market.
On the other hand, Cuatro achieved an excellent position in the free television market in Spain. Audience rates showed a steadily up-trend performance in the year as well as a remarkable positioning in the market. This seems to us an evidence of a solid project to which Sogecable has devoted several and important resources this year. Cuatro has already become a relevant opportunity for Sogecable for the future."
''Digital+''
The headlines of DIGITAL+, Sogecable's pay-TV activity in the fourth quarter of 2006 were as follows:
• DIGITAL+ increased its subscriber base again this quarter. In the past three months, DIGITAL+ added over 38,000 new net customers to its services.
• During 2006, DIGITAL+ increased its subscriber base by over 84.000 new net subscribers, reaching 2,044,000 customers as of December 31st 2006.
• This growth in subscribers has been achieved as a result of both an increase in the number of gross subscribers joining the services as well as a reduction in the cancellation rate, which stood at 11.5% as of December 31st 2006.
• The average revenue per customer reached 46.7 euros in the quarter. The average revenue from monthly subscriptions continued to rise and stood at 39.2 euros. The average pay-per-view revenue reached 7.4 euros in the quarter. Both amounts returned to similar levels recorded in the same period of 2005, after being affected during the year by the impact derived from the migration of former ana*ogue subscribers.
During the quarter, DIGITAL+ subscribers continued to enjoy the leading pay television offer available in Spain, with the most complete selection of contents across all programming genres.
In this respect, it is worth mention in the quarter the awarded films (“Star Wars: Episode III”; “Batman begins”; “Match Point” and “Kingdom of Heaven”), the first-runs of the most acclaimed television sitcoms and the most complete children's, do***entary and news programming all included in the widest choice of national and international channel line-up.
Additionally, DIGITAL+ customers continued to enjoy the widest coverage of the most interesting sporting events for the Spanish market. The exclusive broadcasting of the Germany Football World Cup in June and July of 2006, which only DIGITAL+ subscribers could view live, was followed by coverage of the Champions League, the Spanish League and the King’s Cup matches starting in September of 2006.
Subscribers enjoy exclusive live broadcasts of three out of four Champions League matches in which Spanish teams are involved. Also, among the Spanish league matches shown exclusive on Cana*l+ every Sunday, was the match between Real Madrid and FC Barcelona (in October of 2006), the biggest sporting event in Spain every year.
Thanks to these contents and the success of the commercial campaigns, the DIGITAL+ subscriber base increased by over 38,000 new net customers in the fourth quarter of 2006.
Consequently, in 2006 DIGITAL+ added an additional 84,000 net subscribers to its services. In the fourth quarter, DIGITAL+ achieved 46% of the net subscriber growth of the year.
In 2005, Sogecable allocated significant resources to promote the migration to DIGITAL+ of ana*ogue subscribers of CANA*L+ who stopped receiving this service in November 2005, due to the launching of Cuatro. The increase in Sogecable subscribers in 2006 reflects a relevant improvement in the evolution of the customer base as compared to the two previous years, in which subscriber migration processes had a significant influence.
As of December 31st 2006, Sogecable had over 2,044,000 subscribers receiving digital broadcasts via satellite from DIGITAL+. On December 31st 2005, DIGITAL+ had 1,960,000 customers.
The subscriber growth in 2006 reflects a positive performance of the two main factors affecting its evolution. In 2006, both an increase in new recruitments and a decrease in the cancellation rate were recorded. Whereas the increase in the number of recruitments of new subscribers took place in every quarter, the number of cancellations decreased in the second half of the year, mainly.
As of December 31st 2006, the annual cancellation rate was 11.5%, showing a downward trend in the last quarters of the year. At the end of the previous quarter, it was 11.7%.
The new customers who joined DIGITAL+ in the fourth quarter of 2006 mainly chose the commercial offers with the most complete contents.
In this respect, 30% of these customers chose offers with a subscription price over 40 euros and 55% chose subscription packages priced between 20 - 40 euros per month. Only 15% of new subscribers requested an initial subscription choice to DIGITAL+ priced at less than 20 euros.
All the new subscription choices include CANA*L+ and are helpful for subsequent marketing actions to promote package upgrades and increase customer’s monthly subscription fee.
Given the selection of new subscribers, retention campaigns and initiatives carried out to enhance customer’s loyalty, the breakdown among offers as of December 31st 2006, shows that most of the subscribers had chosen the contents offered exclusively by DIGITAL+, which include all or part of CANA*L+ family channels.
In comparison with the breakdown of subscribers as of September 30th 2006, noteworthy was the new increase in offers with the most complete contents, which continue to be enjoyed by over half of DIGITAL+ customers.
Linked to the breakdown of subscribers among the different choices, the average, subscription revenue increased in the fourth quarter as compared to previous quarters, and amounted to 39.2 euros per subscriber and month.
The average revenue from pay-per-view services amounted to 7.4 euros per month.
Its performance is directly linked to the evolution of the Spanish football league season.
As a whole, the average revenue per subscriber in the fourth quarter of 2006 amounted to 46.7 euros per subscriber and month. In comparison, in the third quarter of 2006, average revenue amounted to 41.3 euros per subscriber and month, 38.6 euros corresponding to the average subscription fee.
In the fourth quarter of 2006, DIGITAL+ updated the prices of its subscription offers. These amounts entered into force for its subscribers as from December 2006.
In this quarter, the average revenue per subscription has recovered similar levels to the one recorded in the last quarter of 2005, when DIGITAL+ enjoyed an average subscription fee of 38.9 euros.
In the first quarters of 2006, the average subscription revenue was mainly affected by the preferential fees enjoyed by the former CANA*L+ ana*ogue subscribers migrated to the digital service during 2005. These subscribers were entitled to keep paying the same monthly subscription fee they were paying for their former ana*ogue subscription.
The gradual addition of new contents by subscribers and the update of subscription prices in December of 2006 have allowed getting back to average revenue levels close to 40 euros a month.
''Cuatro''
Despite having started broadcasting in November 7th 2005, Cuatro ended 2006 consolidating an audience which enables it to be considered already a relevant operator in the free-to-air television market in Spain.
In the fourth quarter of 2006, Cuatro continued to steadily increase its audience rates following the same trend shown in previous quarters. In December 2006, Cuatro recorded an average audience of 7.2%, which was the highest level of the year, putting aside the impact of the Germany 2006 Football World Cup matches in the audiences of the month of June 2006.
Cuatro continues to increase month after month its audience share in the main segments of the market. In the segments of most interest for advertisers, audience rates exceed the daily averages reached.
Specifically, in December 2006, the average audience rate reached in the commercial target (individuals aged 16 - 54 years from all social classes except the lowest and living in towns with over 10.000 inhabitants) and the core commercial target (individuals aged 16 - 44 years, from all social classes except the lowest and living in towns with over 50.000 inhabitants) were 9.0% and 10.0%, respectively.
Cuatro's average audience share (24 hours, total individuals) in 2006 was 6.4%, which exceeds the rates obtained by most second-generation European channels in their first year of operations.
The Germany Football World Cup enabled Cuatro to show record audience shares, ranked matches shown among the most watched programmes in Spain in 2006 and benefited the image and recognition of the channel. Specifically, two of the games broadcast were ranked as the second and third most watched programmes in Spain in 2006, and were only topped by another sporting event broadcasted by Televisión Española.
Increases in audience were shown in all of the channel's time slots during 2006, the highest shares being recorded in night-time hours, which benefited the channel's prime time figures.
The evolution of audience shares by days of the week was also positive. In 2006, Cuatro obtained its best results on Tuesdays, as a result of the success of “House”, whose average audience share in the fourth quarter was 18.4%.
Nevertheless, Cuatro's audience shares on the other days of the week were distributed rather uniformly and showed no significant differences with respect to the overall average recorded. Programmes such as “Cuarto Milenio” (10.2% average audience share in 2006); “El Hormiguero” (9.6% average audience share); “Noche Hache” (9.0% average in its second season); “Supermodelo 2006” (8.4%); “Callejeros” (8.9%) among others, enabled the following average audience levels on the different days of the week.
In January 2007, Cuatro continued its upward trend in audience share, reaching an average of 7.5% (24 hours, total individuals), up by 2.5 points with respect to the figure recorded in the same month of 2006.
''FINANCIAL EVOLUTION''
As of December 31st 2006, the highlights of Sogecable's results are as follows:
• In 2006, Sogecable's Net Turnover totalled € 1,654.7 million, reaching record high figures. Revenues for the quarter reached 463.9 million euros due to increases in subscriber and advertising revenues.
• Sogecable's EBITDA as of December 31st 2006 amounted to a 209.2 million euros, as compared to 324.0 million euros in 2005. Cuatro recorded EBITDA losses of 98.8 million euros in 2006, which is the main source of the year-onyear variation.
• Sogecable's EBITDA for the fourth quarter of 2006 amounted to 56.0 million euros up 11.0% with respect to the EBITDA recorded in the same period of 2005.
• In 2006, Sogecable’s EBIT amounted to profits of 7.1 million euros.
•The Net Losses attributed to the parent Company amounted to 38.2 million euros, as compared to the profits of 7.7 million euros recorded in 2005.
• Sogecable has recorded 164.1 million euros under the ***ulative Results line of the Balance Sheet in order to show the value of its tax credits after the change in future Corporate Tax rates recently passed in Spain.
''Net Turnover''
In the fourth quarter of 2006, Sogecable's Net Turnover amounted to 462.0 million euros, which represents a record turnover for the quarter, with a 9.1% increase with respect to the same period of 2005, when Net Turnover reached 423.3 million euros. Of this amount, 399.9 million euros relate to pay television activities and 62.1 million euros were contributed by Cuatro's activities.
As of December 31st 2006, Sogecable's ***ulative Net Turnover amounted to 1,654.7 million euros, a 9.3% increase in comparison to the 1,514.5 million euros recorded in 2005.
Of the total revenues, the main contribution relates to subscriber revenues which amounted to 1,078.0 million euros, as compared to 1,059.5 million euros in 2005 and which account for 65% of Sogecable's Net Turnover.
The increase in advertising revenues since Cuatro started broadcasting has allowed significant rises in these revenues in 2006, which already account for 12% of Sogecable's Net Turnover, amounting to 202.1 million euros.
Other revenues amounted 374.7 million euros in 2006, as compared to the 380.5 million euros generated in 2005.
''Subscriber revenues''
In the fourth quarter of 2006, Sogecable's advertising revenues amounted to 289.3 million euros, as compared to the 272.1 million euros registered for the same period in 2005.
As of December 31st 2006, ***ulative subscriber revenues amounted to 1,078.0 million euros, up 18.5 million euros in comparison to the 1,059.5 million euros recorded in 2005.
In the first nine months of 2006, the increase in digital subscriber revenues had offset the lost of the revenues which in 2005 came from monthly ana*ogue subscriptions. In the fourth quarter of 2006, DIGITAL+ subscriber revenues increased once again and exceeded in 17.2 million euros the revenues generated in the same period of 2005 by both digital subscribers and those subscribing to the ana*ogue service, which discontinued in November of 2005 to allow Cuatro to use its broadcasting frequency.
The 6.3% year-on year increase in subscriber revenues in the fourth quarter of 2006 reflects the positive comparison in the number of subscribers during the period, which in November and December was no longer affected by ana*ogue subscribers.
Additionally, the growth in turnover includes the increase in the average revenue resulting from the subscribers’ selection of offers and from the application of new subscription fees in force since December 2006. For customers still in their first year of subscription, prices will remain unchanged until the end of the first twelve months of subscription.
Additionally, in 2006, pay-per-view revenues increased by 15.7% in comparison to the amounts accounted in 2005.
''Advertising revenues''
In the fourth quarter of 2006, Sogecable's advertising revenues amounted to 66.2 million euros, compared to the 24.8 million euros obtained in the same period of 2005.
Since Cuatro started broadcasting on November 7th 2005, advertising corresponding to the six-hour daily window of open broadcasts of CANA*L+ ana*ogue service was transferred to free-to-air activities, and accordingly, the returns generated from this advertising are no longer recorded under pay television operations.
As of December 31st 2006, Sogecable's advertising revenues amounted to 202.1 million euros, as compared to the 74.5 million euros generated in 2005. On the whole, Sogecable increased its advertising revenues by 127.6 million euros during 2006.
In 2006, the advertising revenues from pay television activities amounted to 28.3 million euros and those from Cuatro totalled 173.8 million euros. In 2005, Cuatro obtained advertising revenues of 13.3 million euros in two months of operations since it was launched on November 7th 2005.
During 2006, Cuatro's advertising revenues have experienced quarterly growths in relation to the increase of the channel's audience share and to improvements in the sales exploitation, all of which was conditioned by the seasonality of advertising in the Spanish market.
''Other revenues''
In 2006, Sogecable's Other Revenues amounted to 374.7 million euros, a 5.8 million euros decrease, from the 380.5 million euros obtained in the previous year.
As compared to the revenues recorded under this section in the previous year, the main increases relate to revenues obtained by Audiovisual Sport from licensing Spanish Football league’s audiovisual rights. Also, the revenues from technical services provided, from broadcasting, from marketing of contents and other items increased by 25.7% with respect to those obtained in 2005. The greatest year-onyear decrease was recorded for revenues from film production and distribution activities and the sublicensing of contents to other operators which ended in June 2006.
Pay television activities generated revenues of 363.2 million euros under this item in 2006, whereas Cuatro generated 11.5 million euros in the year.
In 2005, Other Revenues from activities related to pay television amounted to 380.2 million euros and free-to-air-television obtained revenues of 0.3 million euros in this item. A 1.5% decrease on the whole.
''Operating expenses''
In the fourth quarter of 2006, operating expenses totalled 407.9 million euros. Of this amount, 325.4 million euros correspond to pay television activities and 82.6 million euros were incurred by Cuatro.
In pay television, a 2.3% year-on-year decrease in operating expenses was recorded in the quarter. The assignment of a portion of the resources to Cuatro was the main source of the variation with respect to the same period of 2005.
In the fourth quarter of 2005, operating expenses amounted to 374.5 million euros, of which 333.1 million euros were related to pay television activities. The operating expenses incurred by Cuatro, whose activities started on November 7th 2005, amounted to 41.4 million euros in that quarter.
The ***ulative operating expenses as of December 31st 2006 increased by 254.9 million euros, mainly related to Cuatro’s activities in 2006.
There was a 12.1 million euros year-on-year increase in pay television costs, a 1.0%, which amounted to 1,165.6 million euros, as compared to 1,153.5 million euros in 2005. This increase is related to purchases, whereas significant drops were recorded for the rest of the items in 2006.
''Purchases''
In the fourth quarter of 2006, purchases totalled 293.2 million euros, as compared to 260.6 million euros devoted to this line in the same period of the previous year.
The main increase in comparison to the amount reached in the same quarter of 2005 is related to the cost of Cuatro's activities, which amounted to 51.1 million euros in the last three months of 2006, as compared to the 21.1 million euros incurred from November 7th 2005 to the end of the year.
The purchases incurred in the fourth quarter of 2006 in pay television activities amounted to 242.0 million euros, up by 2.6 million euros, a 1.1% increase in this item with respect to the same period of 2005.
As of December 31st 2006, ***ulative purchases amounted to 1,007.5 million euros, as compared to the 799.6 million euros incurred in 2005. The ***ulative costs of pay television activity contents amounted to 829.1 million euros in 2006, whereas 178.4 million euros were incurred by Cuatro, whose operations are the main source of year-on-year variation.
The figures for both activities include the cost of the 2006 Germany Football World Cup rights. In this respect, DIGITAL+ aired all these matches live and Cuatro shared with la***ta the broadcasting of the eight most important matches.
Moreover, 2006 figures also include the proportional cost of the new Spanish Football League season, after the agreements reached with Mediapro on July 27th, 2006.
''Personnel Expenses''
In the fourth quarter of 2006, personnel expenses totalled 30.9 million euros, compared to the 29.0 million euros incurred in the same quarter of the previous year.
As of December 31st 2006, personnel expenses amounted to 131.6 million euros, compared to the 116.9 million euros recorded in 2005.
As of December 31st 2006, there was a 9.9% year-on-year drop in personnel expenses attributable to pay television activities, which amounted to 100.9 million euros, as compared to 111.9 million euros in 2005. In the fourth quarter of 2006, these expenses amounted to 24.1 million euros.
The personnel expenses of Cuatro amounted to 6.8 euros in the fourth quarter of 2006, and to 30.8 million euros in 2006.
Sogecable's average headcount in 2006 was 1,885 compared to an average 1,811 employees in 2005.
''Other Operating Expenses''
In the fourth quarter of 2006, Sogecable's Other Operating Expenses amounted to 83.9 million euros, compared to the 84.9 million euros recorded in the same period of the previous year.
As of December 31st 2006, Sogecable's Other Operating Expenses totalled 310.7 million euros, as compared to the 278.4 million euros recorded in 2005.
In 2006, there was a 10.5% year-on-year drop in the costs incurred in pay television activities, as compared to the costs incurred in 2005. Additionally, Sogecable incurred in ***ulative costs of 75.1 million euros in relation to Cuatro's activities in 2006.
With respect to pay television activities, the main year-on-year variations relate to the increased cost of advertising campaigns to recruit new pay television subscribers. In the case of free-to-air television operations, the increases are related to broadcasting expenses linked to Digital Terrestrial Television services.
''EBITDA''
In the fourth quarter of 2006, Sogecable's EBITDA amounted to 56.0 million euros, up 11.0% as compared to the 50.4 million euros recorded in the same period of 2005. Pay television activities generated an EBITDA of 76.4 million euros and Cuatro contributed with a negative EBITDA of 20.5 million euros.
As of December 31st 2006, Sogecable’s ***ulative EBITDA amounted to 209.2 million euros, as compared to the 324.0 million euros in 2005.
As of December 31st 2006, EBITDA from pay television activities amounted to 308.0 million euros, as compared to the 351.8 million euros in 2005. The returns on the advertising window of CANA*L+, transferred to free-air-television activities, is the main ongoing difference in the activities carried on in both years. The year-on-year variation also reflects the broadcast of the 2006 Germany World Football Cup by DIGITAL+ and the ana*ogue subscriber revenues in the first ten months of 2005.
Cuatro’s first full year of operations has had a 98.8 million euros negative contribution to the EBITDA of Sogecable in 2006. In 2005, Cuatro had incurred net operating losses of 27.8 million euros.
''EBIT''
In the fourth quarter of 2006, Sogecable's EBIT amounted to profits of 4.2 million euros as compared to the negative 10.1 million euros recorded in the same quarter of 2005, this represents a 14.3 million euros increase.
As of December 31st 2006, EBIT showed a positive balance of 7.1 million euros in comparison to profits of 91.1 million euros recorded in 2005. The ***ulative EBIT generated by pay television activities amounted to 110.0 million euros, whereas Cuatro contributed a negative EBIT of 102.9 million euros.
In the fourth quarter of 2006, depreciation and amortisation charges dropped by 8.8 million euros, down 14.5%. In 2006, depreciation and amortisation expenses amounted to 202.1 million euros, compared to 232.9 million euros in 2005, a 30.8 million euros year-on-year drop.
In 2006, the most significant factor with respect to the previous year was the drop in amortisations recorded by Audiovisual Sport, although the continuing decline in the depreciation charges relating to digital decoders and the amortisation relating to film rights also gave rise to significant drops.
''Results''
In the fourth quarter of 2006, Sogecable recorded net losses of 12.3 million euros, as compared to the net losses of 11.8 million euros recorded in the same period of 2005.
As of December 31st 2006, Sogecable's ***ulative net losses amounted to 38.2 million euros, compared to a profit of 7.7 million euros recorded in 2005.
The year-on-year variation mainly relates to the negative contribution of the activities of Cuatro during its first full year of operations.
''Investments''
During the fourth quarter of 2006, Sogecable made investments amounting to 42.0 million euros. The main investments related to the acquisition of digital decoders and the installations of new DIGITAL+ subscribers.
***ulative investments as of December 31st 2006 amounted to 237.5 million euros. The most significant of these amounting to 111.7 million euros, related to the acquisition by Sogecable of the minority stakes in Cana*l Satélite Digital owned by Warner (10%) and Dalbergia (4.5%) in the first quarter of 2006. Since then, Sogecable holds 100% of this company's share capital.
''Bank Debt''
As of December 31st 2006, the bank debt draw down by Sogecable totalled 1,004.6 million euros, as compared to the 1,016.8 million euros drawn down as of December 31st 2005 and the 1,050.1 million euros drawn down at the end of the previous quarter.
In 2006, Sogecable was able to finance the first full year of Cuatro's operations, without increasing its bank debt.
''Corporate Income Tax''
The Law 35/2006 passed on November 28th 2006, has modified the corporate income tax rates applicable in Spain for upcoming financial years. Consequently, Sogecable adjusted the value of its deferred tax assets and liabilities to the rates in force at the time in the future when they will be used.
Accordingly, 164.1 million euros were recorded under the caption "***ulative Results" in Sogecable’s Consolidated Balance Sheet as of December 31st 2006, given that these were tax assets and liabilities generated in previous years. After this, the Tax Credits balance as of December 31st 2006 shows the value in the future of the tax shield arose from losses carried forward and Equity is updated with the accounting impact derived from the new tax legislation.
• 2006 ends giving Cuatro an average audience share of 7.2% in the month of December. Showing a growing trend, the annual average rate states at 6.4%.
• In 2006, Sogecable’s Net Turnover hits record figures reaching 1,654.7 million euros, up 9.3% year-on-year. Increases in both DIGITAL+ subscriber revenues and Cuatro advertising turnover have been the main drivers of growth in the year.
• Sogecable’s EBITDA reached 209.2 million euros in 2006. The pay television activities carried out an EBITDA of 308.0 million euros and Cuatro showed operational losses of 98.8 million euros.
• As of December 31st 2006, Sogecable’s net bank debt stands at 1,004.6 million euros, in comparison to 1,016.8 million euros withdrawn at the end of 2005. In 2006, Sogecable has been able to finance the first year of operations of Cuatro with no bank debt resources.
Javier Díez de Polanco, CEO of Sogecable, stated: “2006 stands as a relevant year for Sogecable’s activities. DIGITAL+ hit two million subscribers and resumed subscriber growth. After years involved in the reorganization of pay television activities and different processes of migration of subscribers, DIGITAL+ has managed to show again net growth of its subscriber base. And this happened in every quarter of the year. This shows its excellent position to benefit from the future growth that this sector will continue to enjoy in the Spanish market.
On the other hand, Cuatro achieved an excellent position in the free television market in Spain. Audience rates showed a steadily up-trend performance in the year as well as a remarkable positioning in the market. This seems to us an evidence of a solid project to which Sogecable has devoted several and important resources this year. Cuatro has already become a relevant opportunity for Sogecable for the future."
''Digital+''
The headlines of DIGITAL+, Sogecable's pay-TV activity in the fourth quarter of 2006 were as follows:
• DIGITAL+ increased its subscriber base again this quarter. In the past three months, DIGITAL+ added over 38,000 new net customers to its services.
• During 2006, DIGITAL+ increased its subscriber base by over 84.000 new net subscribers, reaching 2,044,000 customers as of December 31st 2006.
• This growth in subscribers has been achieved as a result of both an increase in the number of gross subscribers joining the services as well as a reduction in the cancellation rate, which stood at 11.5% as of December 31st 2006.
• The average revenue per customer reached 46.7 euros in the quarter. The average revenue from monthly subscriptions continued to rise and stood at 39.2 euros. The average pay-per-view revenue reached 7.4 euros in the quarter. Both amounts returned to similar levels recorded in the same period of 2005, after being affected during the year by the impact derived from the migration of former ana*ogue subscribers.
During the quarter, DIGITAL+ subscribers continued to enjoy the leading pay television offer available in Spain, with the most complete selection of contents across all programming genres.
In this respect, it is worth mention in the quarter the awarded films (“Star Wars: Episode III”; “Batman begins”; “Match Point” and “Kingdom of Heaven”), the first-runs of the most acclaimed television sitcoms and the most complete children's, do***entary and news programming all included in the widest choice of national and international channel line-up.
Additionally, DIGITAL+ customers continued to enjoy the widest coverage of the most interesting sporting events for the Spanish market. The exclusive broadcasting of the Germany Football World Cup in June and July of 2006, which only DIGITAL+ subscribers could view live, was followed by coverage of the Champions League, the Spanish League and the King’s Cup matches starting in September of 2006.
Subscribers enjoy exclusive live broadcasts of three out of four Champions League matches in which Spanish teams are involved. Also, among the Spanish league matches shown exclusive on Cana*l+ every Sunday, was the match between Real Madrid and FC Barcelona (in October of 2006), the biggest sporting event in Spain every year.
Thanks to these contents and the success of the commercial campaigns, the DIGITAL+ subscriber base increased by over 38,000 new net customers in the fourth quarter of 2006.
Consequently, in 2006 DIGITAL+ added an additional 84,000 net subscribers to its services. In the fourth quarter, DIGITAL+ achieved 46% of the net subscriber growth of the year.
In 2005, Sogecable allocated significant resources to promote the migration to DIGITAL+ of ana*ogue subscribers of CANA*L+ who stopped receiving this service in November 2005, due to the launching of Cuatro. The increase in Sogecable subscribers in 2006 reflects a relevant improvement in the evolution of the customer base as compared to the two previous years, in which subscriber migration processes had a significant influence.
As of December 31st 2006, Sogecable had over 2,044,000 subscribers receiving digital broadcasts via satellite from DIGITAL+. On December 31st 2005, DIGITAL+ had 1,960,000 customers.
The subscriber growth in 2006 reflects a positive performance of the two main factors affecting its evolution. In 2006, both an increase in new recruitments and a decrease in the cancellation rate were recorded. Whereas the increase in the number of recruitments of new subscribers took place in every quarter, the number of cancellations decreased in the second half of the year, mainly.
As of December 31st 2006, the annual cancellation rate was 11.5%, showing a downward trend in the last quarters of the year. At the end of the previous quarter, it was 11.7%.
The new customers who joined DIGITAL+ in the fourth quarter of 2006 mainly chose the commercial offers with the most complete contents.
In this respect, 30% of these customers chose offers with a subscription price over 40 euros and 55% chose subscription packages priced between 20 - 40 euros per month. Only 15% of new subscribers requested an initial subscription choice to DIGITAL+ priced at less than 20 euros.
All the new subscription choices include CANA*L+ and are helpful for subsequent marketing actions to promote package upgrades and increase customer’s monthly subscription fee.
Given the selection of new subscribers, retention campaigns and initiatives carried out to enhance customer’s loyalty, the breakdown among offers as of December 31st 2006, shows that most of the subscribers had chosen the contents offered exclusively by DIGITAL+, which include all or part of CANA*L+ family channels.
In comparison with the breakdown of subscribers as of September 30th 2006, noteworthy was the new increase in offers with the most complete contents, which continue to be enjoyed by over half of DIGITAL+ customers.
Linked to the breakdown of subscribers among the different choices, the average, subscription revenue increased in the fourth quarter as compared to previous quarters, and amounted to 39.2 euros per subscriber and month.
The average revenue from pay-per-view services amounted to 7.4 euros per month.
Its performance is directly linked to the evolution of the Spanish football league season.
As a whole, the average revenue per subscriber in the fourth quarter of 2006 amounted to 46.7 euros per subscriber and month. In comparison, in the third quarter of 2006, average revenue amounted to 41.3 euros per subscriber and month, 38.6 euros corresponding to the average subscription fee.
In the fourth quarter of 2006, DIGITAL+ updated the prices of its subscription offers. These amounts entered into force for its subscribers as from December 2006.
In this quarter, the average revenue per subscription has recovered similar levels to the one recorded in the last quarter of 2005, when DIGITAL+ enjoyed an average subscription fee of 38.9 euros.
In the first quarters of 2006, the average subscription revenue was mainly affected by the preferential fees enjoyed by the former CANA*L+ ana*ogue subscribers migrated to the digital service during 2005. These subscribers were entitled to keep paying the same monthly subscription fee they were paying for their former ana*ogue subscription.
The gradual addition of new contents by subscribers and the update of subscription prices in December of 2006 have allowed getting back to average revenue levels close to 40 euros a month.
''Cuatro''
Despite having started broadcasting in November 7th 2005, Cuatro ended 2006 consolidating an audience which enables it to be considered already a relevant operator in the free-to-air television market in Spain.
In the fourth quarter of 2006, Cuatro continued to steadily increase its audience rates following the same trend shown in previous quarters. In December 2006, Cuatro recorded an average audience of 7.2%, which was the highest level of the year, putting aside the impact of the Germany 2006 Football World Cup matches in the audiences of the month of June 2006.
Cuatro continues to increase month after month its audience share in the main segments of the market. In the segments of most interest for advertisers, audience rates exceed the daily averages reached.
Specifically, in December 2006, the average audience rate reached in the commercial target (individuals aged 16 - 54 years from all social classes except the lowest and living in towns with over 10.000 inhabitants) and the core commercial target (individuals aged 16 - 44 years, from all social classes except the lowest and living in towns with over 50.000 inhabitants) were 9.0% and 10.0%, respectively.
Cuatro's average audience share (24 hours, total individuals) in 2006 was 6.4%, which exceeds the rates obtained by most second-generation European channels in their first year of operations.
The Germany Football World Cup enabled Cuatro to show record audience shares, ranked matches shown among the most watched programmes in Spain in 2006 and benefited the image and recognition of the channel. Specifically, two of the games broadcast were ranked as the second and third most watched programmes in Spain in 2006, and were only topped by another sporting event broadcasted by Televisión Española.
Increases in audience were shown in all of the channel's time slots during 2006, the highest shares being recorded in night-time hours, which benefited the channel's prime time figures.
The evolution of audience shares by days of the week was also positive. In 2006, Cuatro obtained its best results on Tuesdays, as a result of the success of “House”, whose average audience share in the fourth quarter was 18.4%.
Nevertheless, Cuatro's audience shares on the other days of the week were distributed rather uniformly and showed no significant differences with respect to the overall average recorded. Programmes such as “Cuarto Milenio” (10.2% average audience share in 2006); “El Hormiguero” (9.6% average audience share); “Noche Hache” (9.0% average in its second season); “Supermodelo 2006” (8.4%); “Callejeros” (8.9%) among others, enabled the following average audience levels on the different days of the week.
In January 2007, Cuatro continued its upward trend in audience share, reaching an average of 7.5% (24 hours, total individuals), up by 2.5 points with respect to the figure recorded in the same month of 2006.
''FINANCIAL EVOLUTION''
As of December 31st 2006, the highlights of Sogecable's results are as follows:
• In 2006, Sogecable's Net Turnover totalled € 1,654.7 million, reaching record high figures. Revenues for the quarter reached 463.9 million euros due to increases in subscriber and advertising revenues.
• Sogecable's EBITDA as of December 31st 2006 amounted to a 209.2 million euros, as compared to 324.0 million euros in 2005. Cuatro recorded EBITDA losses of 98.8 million euros in 2006, which is the main source of the year-onyear variation.
• Sogecable's EBITDA for the fourth quarter of 2006 amounted to 56.0 million euros up 11.0% with respect to the EBITDA recorded in the same period of 2005.
• In 2006, Sogecable’s EBIT amounted to profits of 7.1 million euros.
•The Net Losses attributed to the parent Company amounted to 38.2 million euros, as compared to the profits of 7.7 million euros recorded in 2005.
• Sogecable has recorded 164.1 million euros under the ***ulative Results line of the Balance Sheet in order to show the value of its tax credits after the change in future Corporate Tax rates recently passed in Spain.
''Net Turnover''
In the fourth quarter of 2006, Sogecable's Net Turnover amounted to 462.0 million euros, which represents a record turnover for the quarter, with a 9.1% increase with respect to the same period of 2005, when Net Turnover reached 423.3 million euros. Of this amount, 399.9 million euros relate to pay television activities and 62.1 million euros were contributed by Cuatro's activities.
As of December 31st 2006, Sogecable's ***ulative Net Turnover amounted to 1,654.7 million euros, a 9.3% increase in comparison to the 1,514.5 million euros recorded in 2005.
Of the total revenues, the main contribution relates to subscriber revenues which amounted to 1,078.0 million euros, as compared to 1,059.5 million euros in 2005 and which account for 65% of Sogecable's Net Turnover.
The increase in advertising revenues since Cuatro started broadcasting has allowed significant rises in these revenues in 2006, which already account for 12% of Sogecable's Net Turnover, amounting to 202.1 million euros.
Other revenues amounted 374.7 million euros in 2006, as compared to the 380.5 million euros generated in 2005.
''Subscriber revenues''
In the fourth quarter of 2006, Sogecable's advertising revenues amounted to 289.3 million euros, as compared to the 272.1 million euros registered for the same period in 2005.
As of December 31st 2006, ***ulative subscriber revenues amounted to 1,078.0 million euros, up 18.5 million euros in comparison to the 1,059.5 million euros recorded in 2005.
In the first nine months of 2006, the increase in digital subscriber revenues had offset the lost of the revenues which in 2005 came from monthly ana*ogue subscriptions. In the fourth quarter of 2006, DIGITAL+ subscriber revenues increased once again and exceeded in 17.2 million euros the revenues generated in the same period of 2005 by both digital subscribers and those subscribing to the ana*ogue service, which discontinued in November of 2005 to allow Cuatro to use its broadcasting frequency.
The 6.3% year-on year increase in subscriber revenues in the fourth quarter of 2006 reflects the positive comparison in the number of subscribers during the period, which in November and December was no longer affected by ana*ogue subscribers.
Additionally, the growth in turnover includes the increase in the average revenue resulting from the subscribers’ selection of offers and from the application of new subscription fees in force since December 2006. For customers still in their first year of subscription, prices will remain unchanged until the end of the first twelve months of subscription.
Additionally, in 2006, pay-per-view revenues increased by 15.7% in comparison to the amounts accounted in 2005.
''Advertising revenues''
In the fourth quarter of 2006, Sogecable's advertising revenues amounted to 66.2 million euros, compared to the 24.8 million euros obtained in the same period of 2005.
Since Cuatro started broadcasting on November 7th 2005, advertising corresponding to the six-hour daily window of open broadcasts of CANA*L+ ana*ogue service was transferred to free-to-air activities, and accordingly, the returns generated from this advertising are no longer recorded under pay television operations.
As of December 31st 2006, Sogecable's advertising revenues amounted to 202.1 million euros, as compared to the 74.5 million euros generated in 2005. On the whole, Sogecable increased its advertising revenues by 127.6 million euros during 2006.
In 2006, the advertising revenues from pay television activities amounted to 28.3 million euros and those from Cuatro totalled 173.8 million euros. In 2005, Cuatro obtained advertising revenues of 13.3 million euros in two months of operations since it was launched on November 7th 2005.
During 2006, Cuatro's advertising revenues have experienced quarterly growths in relation to the increase of the channel's audience share and to improvements in the sales exploitation, all of which was conditioned by the seasonality of advertising in the Spanish market.
''Other revenues''
In 2006, Sogecable's Other Revenues amounted to 374.7 million euros, a 5.8 million euros decrease, from the 380.5 million euros obtained in the previous year.
As compared to the revenues recorded under this section in the previous year, the main increases relate to revenues obtained by Audiovisual Sport from licensing Spanish Football league’s audiovisual rights. Also, the revenues from technical services provided, from broadcasting, from marketing of contents and other items increased by 25.7% with respect to those obtained in 2005. The greatest year-onyear decrease was recorded for revenues from film production and distribution activities and the sublicensing of contents to other operators which ended in June 2006.
Pay television activities generated revenues of 363.2 million euros under this item in 2006, whereas Cuatro generated 11.5 million euros in the year.
In 2005, Other Revenues from activities related to pay television amounted to 380.2 million euros and free-to-air-television obtained revenues of 0.3 million euros in this item. A 1.5% decrease on the whole.
''Operating expenses''
In the fourth quarter of 2006, operating expenses totalled 407.9 million euros. Of this amount, 325.4 million euros correspond to pay television activities and 82.6 million euros were incurred by Cuatro.
In pay television, a 2.3% year-on-year decrease in operating expenses was recorded in the quarter. The assignment of a portion of the resources to Cuatro was the main source of the variation with respect to the same period of 2005.
In the fourth quarter of 2005, operating expenses amounted to 374.5 million euros, of which 333.1 million euros were related to pay television activities. The operating expenses incurred by Cuatro, whose activities started on November 7th 2005, amounted to 41.4 million euros in that quarter.
The ***ulative operating expenses as of December 31st 2006 increased by 254.9 million euros, mainly related to Cuatro’s activities in 2006.
There was a 12.1 million euros year-on-year increase in pay television costs, a 1.0%, which amounted to 1,165.6 million euros, as compared to 1,153.5 million euros in 2005. This increase is related to purchases, whereas significant drops were recorded for the rest of the items in 2006.
''Purchases''
In the fourth quarter of 2006, purchases totalled 293.2 million euros, as compared to 260.6 million euros devoted to this line in the same period of the previous year.
The main increase in comparison to the amount reached in the same quarter of 2005 is related to the cost of Cuatro's activities, which amounted to 51.1 million euros in the last three months of 2006, as compared to the 21.1 million euros incurred from November 7th 2005 to the end of the year.
The purchases incurred in the fourth quarter of 2006 in pay television activities amounted to 242.0 million euros, up by 2.6 million euros, a 1.1% increase in this item with respect to the same period of 2005.
As of December 31st 2006, ***ulative purchases amounted to 1,007.5 million euros, as compared to the 799.6 million euros incurred in 2005. The ***ulative costs of pay television activity contents amounted to 829.1 million euros in 2006, whereas 178.4 million euros were incurred by Cuatro, whose operations are the main source of year-on-year variation.
The figures for both activities include the cost of the 2006 Germany Football World Cup rights. In this respect, DIGITAL+ aired all these matches live and Cuatro shared with la***ta the broadcasting of the eight most important matches.
Moreover, 2006 figures also include the proportional cost of the new Spanish Football League season, after the agreements reached with Mediapro on July 27th, 2006.
''Personnel Expenses''
In the fourth quarter of 2006, personnel expenses totalled 30.9 million euros, compared to the 29.0 million euros incurred in the same quarter of the previous year.
As of December 31st 2006, personnel expenses amounted to 131.6 million euros, compared to the 116.9 million euros recorded in 2005.
As of December 31st 2006, there was a 9.9% year-on-year drop in personnel expenses attributable to pay television activities, which amounted to 100.9 million euros, as compared to 111.9 million euros in 2005. In the fourth quarter of 2006, these expenses amounted to 24.1 million euros.
The personnel expenses of Cuatro amounted to 6.8 euros in the fourth quarter of 2006, and to 30.8 million euros in 2006.
Sogecable's average headcount in 2006 was 1,885 compared to an average 1,811 employees in 2005.
''Other Operating Expenses''
In the fourth quarter of 2006, Sogecable's Other Operating Expenses amounted to 83.9 million euros, compared to the 84.9 million euros recorded in the same period of the previous year.
As of December 31st 2006, Sogecable's Other Operating Expenses totalled 310.7 million euros, as compared to the 278.4 million euros recorded in 2005.
In 2006, there was a 10.5% year-on-year drop in the costs incurred in pay television activities, as compared to the costs incurred in 2005. Additionally, Sogecable incurred in ***ulative costs of 75.1 million euros in relation to Cuatro's activities in 2006.
With respect to pay television activities, the main year-on-year variations relate to the increased cost of advertising campaigns to recruit new pay television subscribers. In the case of free-to-air television operations, the increases are related to broadcasting expenses linked to Digital Terrestrial Television services.
''EBITDA''
In the fourth quarter of 2006, Sogecable's EBITDA amounted to 56.0 million euros, up 11.0% as compared to the 50.4 million euros recorded in the same period of 2005. Pay television activities generated an EBITDA of 76.4 million euros and Cuatro contributed with a negative EBITDA of 20.5 million euros.
As of December 31st 2006, Sogecable’s ***ulative EBITDA amounted to 209.2 million euros, as compared to the 324.0 million euros in 2005.
As of December 31st 2006, EBITDA from pay television activities amounted to 308.0 million euros, as compared to the 351.8 million euros in 2005. The returns on the advertising window of CANA*L+, transferred to free-air-television activities, is the main ongoing difference in the activities carried on in both years. The year-on-year variation also reflects the broadcast of the 2006 Germany World Football Cup by DIGITAL+ and the ana*ogue subscriber revenues in the first ten months of 2005.
Cuatro’s first full year of operations has had a 98.8 million euros negative contribution to the EBITDA of Sogecable in 2006. In 2005, Cuatro had incurred net operating losses of 27.8 million euros.
''EBIT''
In the fourth quarter of 2006, Sogecable's EBIT amounted to profits of 4.2 million euros as compared to the negative 10.1 million euros recorded in the same quarter of 2005, this represents a 14.3 million euros increase.
As of December 31st 2006, EBIT showed a positive balance of 7.1 million euros in comparison to profits of 91.1 million euros recorded in 2005. The ***ulative EBIT generated by pay television activities amounted to 110.0 million euros, whereas Cuatro contributed a negative EBIT of 102.9 million euros.
In the fourth quarter of 2006, depreciation and amortisation charges dropped by 8.8 million euros, down 14.5%. In 2006, depreciation and amortisation expenses amounted to 202.1 million euros, compared to 232.9 million euros in 2005, a 30.8 million euros year-on-year drop.
In 2006, the most significant factor with respect to the previous year was the drop in amortisations recorded by Audiovisual Sport, although the continuing decline in the depreciation charges relating to digital decoders and the amortisation relating to film rights also gave rise to significant drops.
''Results''
In the fourth quarter of 2006, Sogecable recorded net losses of 12.3 million euros, as compared to the net losses of 11.8 million euros recorded in the same period of 2005.
As of December 31st 2006, Sogecable's ***ulative net losses amounted to 38.2 million euros, compared to a profit of 7.7 million euros recorded in 2005.
The year-on-year variation mainly relates to the negative contribution of the activities of Cuatro during its first full year of operations.
''Investments''
During the fourth quarter of 2006, Sogecable made investments amounting to 42.0 million euros. The main investments related to the acquisition of digital decoders and the installations of new DIGITAL+ subscribers.
***ulative investments as of December 31st 2006 amounted to 237.5 million euros. The most significant of these amounting to 111.7 million euros, related to the acquisition by Sogecable of the minority stakes in Cana*l Satélite Digital owned by Warner (10%) and Dalbergia (4.5%) in the first quarter of 2006. Since then, Sogecable holds 100% of this company's share capital.
''Bank Debt''
As of December 31st 2006, the bank debt draw down by Sogecable totalled 1,004.6 million euros, as compared to the 1,016.8 million euros drawn down as of December 31st 2005 and the 1,050.1 million euros drawn down at the end of the previous quarter.
In 2006, Sogecable was able to finance the first full year of Cuatro's operations, without increasing its bank debt.
''Corporate Income Tax''
The Law 35/2006 passed on November 28th 2006, has modified the corporate income tax rates applicable in Spain for upcoming financial years. Consequently, Sogecable adjusted the value of its deferred tax assets and liabilities to the rates in force at the time in the future when they will be used.
Accordingly, 164.1 million euros were recorded under the caption "***ulative Results" in Sogecable’s Consolidated Balance Sheet as of December 31st 2006, given that these were tax assets and liabilities generated in previous years. After this, the Tax Credits balance as of December 31st 2006 shows the value in the future of the tax shield arose from losses carried forward and Equity is updated with the accounting impact derived from the new tax legislation.