MCOT stuck in the twilight zone

A twilight zone. That could be a perfect way to describe MCOT Plc, the 60-year-old state-owned broadcasting enterprise that is often fraught with uncertainties and the intervention of politicians wishing to reap benefits from a slow-moving and inert organisation that refuses to change the way it operates.

It is said the tail always follows the head. Unfortunately, MCOT’s head has often been changed following changes of government that have interrupted management policies and operations. That has strongly affected its business direction for decades.

The recent resignation of president Anek Permvongseni, effective June 12, is significant. He tendered his resignation stating health problems as a reason after being in office for only 20 months. The full term normally lasts four years. MCOT has had four presidents and three acting presidents in the past decade.

His resignation was said to have followed concerns that MCOT’s procurement of its digital TV network equipment lacked transparency. The equipment specifications were alleged to be written to favour a private firm related to the Shinawatra family.

MCOT plans to purchase an equipment set at 13.2 million baht, while the Royal Thai Army will spend 4.46 million and Thai PBS 3.18 million.

The falling performance of its TV channel is also another reason given by sources for Mr Anek’s resignation.

Given the rise in digital TV channels in the country, MCOT has challenges ahead. 

Digital transition

In the transition era of digital TV led by the National Broadcasting and Telecommunications Commission (NBTC), the number of free TV channels has increased from six to 48, with 24 commercial channels, 12 public purpose channels and 12 community purpose channels. MCOT, the operator of Channel 9, is likely to suffer a loss of revenue because of the increased number of competitors.

Jessada Promjat, acting president and chief financial officer of MCOT, told the Bangkok Post that MCOT has prepared for the new battlefield of TV, which is the most influential media of Thai people with 98% accessibility.

Broadcasting business from TV and radio remains its key revenue earner, while non-broadcast business will generate important revenue in the near future, particularly network rental and digital TV set-top box sales.

Mr Jessada said MCOT will lose 880 million baht in revenue from concession fees in three phases due mainly to the expiry of three concessions. These are the loss of 249 million baht a year from the end of TrueVisions’ concession on Sept 30, 344 million baht from True Cable on Dec 30, 2019, and 288 million baht from BEC-World Plc in 2020.

Panu Satienpoch, senior vice-president of human resources, said MCOT still has a state-enterprise working style. Internal communications are slow and responses are low.

Its organisational structure must be revised in line with the new digital TV business. It won licences to run two digital channels — children’s channel MCOT Family and a high-definition (HD) variety channel — and will also provide a digital TV network.

MCOT’s performance grew along with overall advertising spending in the last five years. Its revenue in 2008 stood at 4.353 billion baht and expanded to 5.985 billion baht in 2013. 

But, its revenue fell by 20% in the first quarter of this year, the lowest in the past nine quarters due to the political turmoil, declining TV ratings and decelerating ad spending from government agencies, which are its major clients. 

The declining performance has recently forced the company to launch an early retirement programme for staff aged more than 55 in order to control its fixed costs.

Low competitiveness

Krungsri Securities, MCOT’s financial adviser, reported that MCOT could gain a high return from a huge investment of 4.95 billion baht in the two digital TV channels with an expected yield of 19.7% a year.

Since the rise of digital TV has started to prompt stronger competition in the broadcasting industry, MCOT’s performance is likely to be hurt. However, the brokerage was confident it would still rank third among free TV channels in term of advertising spending even though its market share would drop to 11.5% in 2018 from 18% now.

Dithanop Watthanawekin, an analyst at KKTrade Securities, said MCOT’s profits in the first quarter were the lowest in two years. The figure came out lower than expectations by 26%, while its revenue of 1.11 billion baht was the lowest in five years.

Although the second quarter’s results may improve on the back of advertising spending during football’s World Cup tournament in June, its low competitiveness and high investment costs in digital TV would make its profit decline by about 44% to 853 million baht this year.

Patcharin Wattanakaewsripet, an analyst from Country Group Securities, said MCOT’s performance is weaker than the overall TV market, reflected in the first-quarter performance, which may have been caused by unattractive content and declining revenue from concession fees.

Declining TV ratings

TV is MCOT’s core revenue and generates 60% of its revenue, followed by radio and non-broadcast business. Its Channel 9 commands 10% of viewership, ranking in third place.

Wannee Rattanapon, chairman of IPG Mediabrands, a media agency, said Channel 9 ratings were declining. In the first month of digital TV’s broadcast trials, the ratings of four free analogue TV channels (Channel 3, 5, 7 and 9) dropped by 8-15%.  

Channel 9’s popular programmes are supplied by outside content providers. They include Baan Nee Mee Rak, Nad Kab Nad, Identity Thailand and Ching Cha Sa Wan.  

MCOT’s channel was popular under Mingkwan Saengsuwan’s presidency in 2002-06 as its positioning was clear.

A source from MCOT said the station’s programming schedule has often suffered interference from politicians who wanted to exploit benefits. As a result, the channel’s viewership and ratings have not improved for the past 10 years.

The source said MCOT may lose its viewers and advertising revenue if content providers, who also have their own digital channels, decide to relocate their content to their own stations.

Digital TV network disputes

MCOT was granted a 15-year digital TV network licence from the NBTC in June last year. Mr Jessada said providing a network service would generate additional revenue to compensate for declining advertising revenue amid fierce competition.

MCOT set a budget of 1.96 billion baht for its digital TV network investment and aims to break even within eight years on condition it has eight clients to rent its network. It currently has five channels renting its network: MCOT Family, MCOT HD, Voice TV, Spring News and Thairath TV HD. 

The absence of a new government and the controversy regarding the purchase of its digital TV network equipment are the main reasons for its network delay. The company plans to solve this problem by renting signal transmitters from equipment providers in order to comply with the NBTC and provide its network to customers. This is likely to raise its operating costs. 

Prasong Poonthanes, director of the State Enterprise Policy Office (SEPO), said the new president of MCOT must turn the organisation around to compete given the TV industry is no longer an oligopoly. SEPO last year warned MCOT to enhance its competitiveness and viewership to try to draw more adverts.

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