Premiere back in black despite soccer loss

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BERLIN -- German pay TV group Premiere was back in black in the first quarter of 2007, returning in the wake of a year of upheaval and corporate restructuring that followed the company's loss of broadcast rights to top German league soccer.

Premiere posted a €4.5 million ($6.1 million) profit in first-quarter 2007, compared to a €18.3 million loss over the same period last year.

Losing the rights to Germany's Bundesliga soccer games to competitor Arena put a dent in revenue, which fell 17.9% to €224.3 million ($305 million). But Premiere was able to counter this by slashing operating expenses, trimming costs by 29% to €186.6 million ($253.8 million).

The bulk of the savings came from not having to pay for Bundesliga rights, but Premiere cut costs across the board. The only area where expenses increased was in outlay for Premiere's new generation of interactive digital and HDTV-capable receivers.

Subscription figures also are beginning to increase again, an indication that the flight of soccer fans from Premiere to Arena may have reached an end. Premiere reported 3.5 million subscribers as of March 31. That's down slightly from the same period last year but up 2.5% from the nadir hit last September when subscriber numbers fell to 3.4 million.

"In the first quarter (of) 2007, Premiere has confirmed the upward trend already indicated in fourth quarter 2006. The net growth of 50,000 subscribers is encouraging. The fact that Premiere has posted a profit on the bottom line is also pleasing. Concerning revenues, we are registering the last significant impact of the churns and decline in (average) revenues per user (ARPU) caused by the loss of the Bundesliga rights. In this context, it is positive that Premiere was able to balance out the decrease in revenues through effective cost management. Premiere is still by far the leading company and the strongest brand in German pay TV," Premiere CEO Georg Kofler said.

Calling the Q1 figures "encouraging," he said he believed Premiere's broad customer base will provide "the decisive advantage in present and future competition."

To compensate for the loss of the Bundesliga, Premiere stocked up on other sports, acquiring rights the English Premier League, English Premier League UEFA Champions League matches and top motor sport tournaments the FIA GT and FIA GT3 Championships.

It also secured German TV premieres of several U.S. series including the third season of "Lost" and Iraqi war drama "Over There."

In the second half of 2007, Premiere plans to launch a satellite-only pay TV offering, Premiere Sky. Kofler said some 50 channels and program providers have expressed interest in distributing their channels via the new system and estimated that Premiere Sky could have 1 million customers by 2010.

One unknown for Premiere is the fate of its deal with Arena to market and distribute Arena's competing pay TV service to German satellite customers. Germany's cartel office blocked the deal earlier this year, pending an investigation into the legality of the two competitors joining forces.

Kofler said Premiere and Arena are currently in negotiations regarding the deal and that they will present a new agreement to regulatory authorities by the end of the month.

Premiere stock was up 2.3% at €16 ($21.8) in late afternoon trading.

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