Securities Market Magazine No8, 2003

Work for the creation of the first Russian business channel RBC-TV is entering its final stage. General Director of the RBC group of companies Yury Rovensky speaks about the details of the project's implementation.

S.M. The price of shares of the head company of the RBC group, OAO RBC Information Systems, displays positive dynamics. Do you attribute this to the enthusiasm of investors regarding information about financing RBC-TV?

Yu.R. Yes, by all means. It is worth mentioning that $15 million have already been invested in RBC-TV, including $10 million by RBC Information Systems; another $5 million were received from a loan by private placement among Western investors. Additionally, we have reached an agreement with investors that if necessary the total amount of financing of the project will be increased to $18 million to $20 million. This information has influenced the dynamics of RBC's shares considerably. However, the key factor, which determines this trend, is RBC's financial results for 2002. They overcame forecasts significantly. In 2002, RBC's revenue went up 62 percent against the previous year; net profits advanced over 50 percent. By the way, the average growth rate of RBC over the past three years exceeded 700 percent, which enabled us to win the 72nd position in Deloitte&Touche Tohmatsu 2002 European Technology Fast 500, the European rating of the fastest growing companies in the advanced technologies industry. As for last year, it is necessary to point out that both RBC's businesses, media and IT, were developing actively. First of all, investors are positively influenced by RBC's financial results; secondly, our share prices show that investors highly estimate our TV project, which is currently being implemented.

S.M. Please tell us about the channel's concept.

Yu.R. The basis of the free 24-hour broadcasting will be business news, analytical programs and commentaries. RBC-TV will broadcast live 18 hours a day. We decided not to reinvent the wheel and use the experience of leading Western business channels, CNBC and Bloomberg. The major goal of RBC-TV is to meet the demand for TV business information. Russian television tends to ignore economic news despite the impressive growth of the Russian financial market and the economy on the whole. We shall change this situation.

Our market research demonstrates that the need in a TV channel about Russian business and for Russian business has been formed today.

We shall broadcast via satellite and cable networks, as well as via TV broadcasting, which will enable every viewer in Moscow and St. Petersburg to tune in to RBC-TV. Additionally, we are in negotiations with a number of regional TV companies. We are striving at RBC-TV's broadcasting to cover the largest and most economically developed cities of Russia.

S.M. What is RBC-TV's target audience?

Yu.R. It is worth mentioning that according to the data of the Russian State Statistics Committee, 10 percent of the Russian population earns one third of the entire income. These people undoubtedly need real-time financial information; according to our estimates, it is them who will be the core of the channel's audience. As for the audience of RBC-TV on the whole, I would point to the following groups. It is top and middle managers of the companies whose securities are listed on exchanges, financiers, investors, managers and specialists, who need fresh economic information for forecasting the situation in business, auditors, consultants, and journalists of business mass media.

S.M. What business model was taken as a basis of the channel?

Yu.R. RBC-TV will make money on advertising. The audience of the business TV channel is interesting for a huge number of advertisers, including investment and insurance companies, banks, real estate agencies, construction firms, airlines, and automobile dealers. This list can easily be continued. Apparently for the companies, whose activities are oriented at servicing consumers, it is profitable to focus their advertising message on the business community. RBC-TV will provide them with such an opportunity in full. By the way, I would like to say that the Russian advertising market has become one of the ten largest markets in Europe. At the same time, TV advertisement has the greatest growth rate.

According to our calculations, the project will break even at the end of the second year of broadcasting. Invested resources will be paid off in full in three years.

Yu.R. We are basing our confidence in the success of Russia business television on an in-depth analysis of the situation in the Russian business and in mass media. And this is not all. To date, we have achieved considerable results from advertising pre-sales. It is worth mentioning that last year RBC's income from media services overcame $14.5 million. We have a reputation, we have a broad audience, which knows us and trusts us. In addition, it is not the first time for RBC to keep ahead and be a pioneer. For example, when last year we organized an IPO, a lot of skeptics denounced our failure.

However, due to the IPO the demand for RBC's shares exceeded the supply by five times. The company's capitalization reached $83 million. The similarity of this situation with the current one is that RBC is able to be at the right time at the right place. Soon, the market will see this once again.