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Letter from the CEO

It was another volatile year for the global economy in 2015, and Indonesia was no exception. Sluggish global growth and high market uncertainty compounded by the depreciation of the Rupiah against the US Dollar, declining export commodity prices and slower than expected public spending contributed to the slowdown of the Indonesian economy. As a result, growth of the Indonesian economy slowed to 3.8% in 2015, its lowest rate of growth since 2009.

Following the election year of 2014, 2015 was projected to be a quieter year in terms of news-making, and these predictions came true across the news industry. Other factors such as the lackluster performance of the Indonesian economy further depressed consumer spending and advertisers’ appetite to spend. As result the advertising market contracted by 2,7% overall.

Reflecting slowing growth in the economy, which grew 4.8% compared with 5.02% in the previous year, according to Media Partners Asia (MPA) the overall advertising market softened, posting negative growth in US Dollar terms, although growth in Rupiah terms was better due to Rupiah depreciation. Of this, net advertising expenditure from the Free To Air (FTA) terrestrial television segment continued to be the dominant component, comprising 66.6% of total net advertising expenditure compared with 63.9% in 2014 according to MPA. By contrast, digital advertising grew 21.1% in 2015 on the back of e-commerce and YouTube video content.

Against a backdrop of slower economic and advertising expenditure growth, VIVA posted a slight decline in revenue to earn IDR2,108.7 trillion for the year. Results were also impacted by an increase dollar-denominated financing costs brought on by depreciation of the Rupiah against the US Dollar in the third quarter, although much of this was unrealized. Consequently, VIVA ended the year nearly flat, with net loss of IDR 511.8 billion compared with net income amounting to Rp 144.3 billion in 2014.

On the other hand, VIVA benefited from the rising value of its shares in PT Intermedia Capital Tbk. (MDIA), the parent company of ANTV. As of year-end, MDIA’s share price had increased significantly from its IPO price of IDR 1,380 to reach IDR 3,325 per share, unlocking value for VIVA.

Of the main three business units, the majority of profit was contributed by subsidiary ANTV, while news station tvOne was essentially flat but managed to maintain its EBITDA margin, an impressive achievement given that all news media in Indonesia was affected by the relative lack of news. Digital news portal, viva.co.id continued to deliver rapid growth. ANTV contributed IDR 1.385,9 billion, an increase of 1.5% compared with the previous year, while tvOne contributed IDR 708.1 billion, 22.9% lower compared with the previous year, and viva.co.id contributed IDR 35.1 billion, a decrease of 49.5% from the previous year.

All the businesses were able to maintain their operational performance, thanks to VIVA’s strategy of 360°experience. Under this concept, viewers are able to access innovative and inspiring content through Free to Air TV, mobile as well as online streaming. Moreover, VIVA also leveraged social media to get feedback from its loyal audiences and promote its on air and off air programs, as well as pushing innovative offline promotions and activities. In this way, the entire media ecosystem was covered. This strategy successfully maintained ANTV’s Tier 1 ranking and tvOne’s #1 news station ranking, while digital portal viva.co.id recorded strong viewer growth on the back of strong content including the integration of video platform. In line with these developments, we also continued to integrate operations between tvOne, ANTV, and viva.co.id, including more synchronized use of content and distribution, towards cost efficiency and higher viewer impact.

Innovations from VIVA Group to drive the 360° strategy in 2015 included increased global program content at ANTV, cementing its position as a leader in dynamic global entertainment, while tvOne continued its breakthrough combination of news and sport. tvOne also continue to focus on news topic that contains dramatic human aspects, and purposely used a more casual style of delivery to connect with the audience. Both stations won a number of awards in reflection of their engaging content, whereas viva.co.id achieved a position as a top five digital portal in Indonesia. VIVA also actively interacted with audiences through social media, reaching out to establish a strong digital presence on all major social media platforms including Twitter, Facebook, Instagram, and Google+ as part of the convergence strategy. This included streaming live broadcasts and significant events online, as well as getting feedback directly from viewers through online media, which in turn informed its operational decisions.

Forecasts by Media Partners Asia and other experts suggest improvement in the Indonesian economy for 2016, with a corresponding recovery in ad spend. In parallel, consumption of digital is expected to accelerate yet further driven in part by the improving quality and affordability of broadband, especially in major urban cities supported by the commercial roll out of 4G-LTE coverage at the end of the year. We therefore expect revenue from our FTA stations ANTV and tvOne to improve, while also expecting growth in visitor numbers for viva. co.id.

This trend toward convergence will be strengthened in all areas of VIVA business units in 2016, aligning content between FTA and  digital portal for increased user interaction. In parallel VIVA will continue to invest in human resources towards driving innovative content creation, leveraging our existing channels. Overall, our targets are to maintain ANTV as a Tier 1 station, tvOne as the first-ranked news station, broaden viva.co.id’s focus from news only to include entertainment and information, and refinance our US Dollar denominated loans in Rupiah from local banks. By combining and expanding our capabilities in digital, entertainment, sports, and news we expect to further strengthen our capabilities as an integrated media and content group company and our position as a leader in the Indonesian media industry.

On behalf of the Board of Directors, I wish to express our appreciation to the Board of Commissioners for their guidance during the year, and to all shareholders for their continued support and confidence. I would also like to thank our employees and business partners for their hard work and dedication to the VIVA mission. Last but not least, I offer my sincere thanks to our loyal viewers and hope that they will continue onwards with us on our journey of innovation to inspire.

Yours sincerely,

Anindya Novyan Bakrie

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