Analyst view, page-2

re: Analyst view - to Arthur Hi Arthur,

I have seen this and similar analyst views.

To answer your questions:

1)
As part of its outside broadcast /production outsourcing arrangements to Global Television, PBL was paid a mixture of cash and shares. In addition to these shares, PBL was also issued performance rights in TMS. These are /were linked to the level of production activity that was awarded to Global Television. certain performance hurdles for securing these performance rights were set. Once the outsourced TV production equalled or exceeded these target levels, PBL was issued with additional shares.

With PBL now tied in to an exclusive OB /outsourced TV production contract with TMS for at least the next 7 years (set 1999, for 10 years), PBL has limited or no in-house production facilities left, and no external broadcast units (ie: the OB equipped vehicles which TMS has and originally acquired from PBL as part of the outsourcing deal). The same situation also applies in relation to TEN, except there, the outsourced production work also extends to all in-studio work for TEN.

In FY02, TEN's OB work towards TMS was >$13m. PBL's accounted for another $10 -12m (likely to exceed $15m in FY03). The TVSN work is quoted in today's Smaller Companies Guide at ~$4 -5m. Other OB work for FoxTel, Fox Footy, SSR, Optus Vision, Becker, etc, accounts for the rest of FY02 revenue. All of these deals are for long-term periods of time, expiring between 2007 and 2010. Indeed, tonight's NRL final is being produced using the OB resources of Global Television. The same occurred with last week's AFL Grand Final.

In addition to the OB activites, PBL's related entity, CPH was a major shareholder in MEG at the time of MEG's acquisition by TMS (ie: CPH sold 19.9% of MEG into TMS for cash. Subsequently, this provided the launching platform for TMS' mid-2001 bid).

PBL's recent increase in its TMS holdings could, therefore, be accounted by a combination of OB performance bonuses, additional MEG sales, and on-market purchases.

2)
The Packer family always works in an acquisitive manner. For some time, they have been active in cinema advertising (first via MEG, now via TMS), cinema operations (via Hoyts), and film /TV production (via TMS, and the US based New Regency Productions which also has a 10-year production deal currently in place with News Corporation and Fox).

The Investec Wentowrth connection is heavily Packer flavoured.

An acquisition /strategic option, therefore, is quite possible and this could account for some of PBL's recent behaviour.

3)
Acquiring more shares to "a bigger say at a possible receivers meetings with an eye to some cheap pickings" has no advantage whatsoever. In fact, it risks PBL /CPH losing even more control. The problem for TEN and PBL in a receivership environment is that they require the OB facilities /equipment that TMS has, but have none of these facilities in place themselves (ie: having previously sold them to TMS). The OB vans that TMS has are sophisticated mini studios capable of complete production /broadcast activities. The replacement cost of each vehicle (TMS has >20 -25 of these vehicles) approximates many millions for each vehicle.

Arthur, I trust that this answers your questions, or is of some further assistance to you.