Indosiar, media companies book gloomy first semester performance
The Jakarta Post, Jakarta
The first semester net profit of television company PT Indosiar Visual Mandiri, which runs Indosiar television network, plunged by 36 percent to Rp 59.8 billion (US$7 million), from Rp 94 billion in the same period last year.
In its financial statement published on Wednesday, Indosiar said that the drop was mostly caused by an increase in operational costs to Rp 374 billion from Rp 271 billion.
Indosiar, the only television company listed on the Jakarta Stock Exchange, recorded a slight increase in net revenue to Rp 477 billion, from Rp 431 billion.
Media analyst Rani Sofyan from Mandiri Sekuritas said the profit decline was the result of stiffer competition in the country's television sector, which was jam-packed with 11 television companies that broadcast nationwide.
"The stiff competition urged the company to spend a lot of money to buy high-rated programs, which were expensive, in order to maintain its audience shares," said Rani, explaining that a decline in audience shares would in turn affect the advertisement revenue of the company.
Based on AC Nielsen's survey, she said, Indosiar's audience shares declined to 20.7 percent in the first semester of this year, from 25.5 percent in the same period last year.
The decline was because some of Indosiar's audiences turned to newly established television stations such as Trans TV, whose audience shares increased to 10.6 percent from 5.6 percent, and TV 7, whose shares also increased to 4.4 percent from 1.4 percent, she said.
Due to the harsh competition, Indosiar has set a plan in motion to invite foreign investors to acquire significant shares in the company in order to improve its financial performance and programs.
However, the company is having difficulties, as the existing regulation limits the maximum ownership of a foreign company in a local TV station at 20 percent.
Indosiar thus plans to delist itself from the stock market and establish a holding company to accommodate a larger ownership for foreign investors. Foreign investors can then control the TV station indirectly through the holding company.
Other media companies followed in the footsteps of Indosiar in terms of gloomy performance.
PT Tempo Inti Media, the publisher of Tempo weekly magazine and Koran Tempo daily newspaper, for example, is still experiencing difficulties in reducing its losses since its initial listing on the stock market in December 2000.
Despite a jump in sales to Rp 47.8 billion from Rp 38.9 billion, the company's losses increased to Rp 8.9 billion from Rp 4.9 billion, due to an increase in sales burden to Rp 36.2 billion from Rp 27.5 billion.
Tempo's revenue was also sucked by an increase in operational costs to Rp 19.8 billion from Rp 17.7 billion.
Media company PT Indoexchange Dotcom, which runs IndoExchange business web portal, recorded losses in the first semester, although it managed to reduce them to Rp 1.6 billion from Rp 2.2 billion. Meanwhile, the company's sales increased to Rp 1.3 billion from Rp 976 million.