Year in Review

It was a year of tremendous challenges as well as excellent opportunities.

Details of our operating units' performance are available in their respective segments of this Annual Report. What is not immediately evident in the financial figures, and what I would like to highlight here, are the challenges and continuing risks faced by the Group, and the steps taken to address them, as well as to protect our ability to sustain long term growth, cashflow and profitability for shareholders.

With our Malaysian TV subscriber base breaching the 2 million mark in the fourth quarter of fiscal 2007, the key task ahead for senior management is to ensure that it continues to grow. But the challenges brought about by a rapidly changing customer profile require far more complex solutions than the ones we dealt with in our pioneering years.



We took risks in those early years, and successfully grew our Malaysian business. We have now reached a stage where we cannot depend on organic or domestic growth alone. Whilst we are uniquely placed to take advantage of the immense regional opportunities, it also means that we, as an organisation, have to increase our risk appetite as we embark into emerging markets with rapidly evolving regulatory structures. Balancing our resources between local and regional opportunities, and reconciling short term returns with longer term value creation will thus be a continuing challenge for management.

Indonesia is a case in point, and admittedly, has been a difficult market for us. To date, we have accounted for RM157.4 million as our share of losses, a significant impact to our bottomline as we continue the formalisation of the venture. Operating performance has been below our expectations for various reasons - mostly beyond our control - but we remain optimistic about the potential of this market. The Asian region continues to provide immense, relatively untapped opportunities. Indeed, it is for this very reason that we are seeking shareholders' approval to expand our regional footprint to India, one of the world's fastest growing consumer market and a much under-penetrated market for pay-TV. The proposed US$166 million equity investment will give us a 20% stake in Sun Direct TV which is expected to commence service in the latter part of 2007.

Finally, in today's relentless world of constant change, we need to stay relevant, and ahead of industry developments. We will respond to competitive distribution platforms such as Internet Protocol TV (IPTV), broadband and a stronger consolidated Free-To-Air offering.

STRENGTHENING HOME MARKET & NURTURING FUTURE GROWTH BUSINESSES
Content remains key to future growth. In particular, creating unique local programmes, supported by compelling international content, will be crucial in strengthening our platforms in Malaysia and the region, and in differentiating us from competitive offerings.

We have organized internally to provide the necessary focus and infrastructure, including setting up a separate Astro Entertainment Network (AEN) unit, to house over 20 Astro-branded channels of various genres and languages. With annual budgets exceeding RM300 million, AEN will also consolidate our Malay language programming for viewers in Malaysia, Brunei and Indonesia, and eventually for niche markets globally. A new content development team headed by Astro veteran and former Senior Director for Content, Zainir Aminullah, is now in place to drive this new initiative and, in time to come, develop it into an important profit centre. Future-proofing our technology and broadcast infrastructure, including the ancillary information technology, through continual upgrading and refreshing, is paramount for our business. This will ensure our systems remain resilient and robust while keeping pace with the rapid and continual technological developments that characterise the media industry.

A vital infrastructure supporting our revenue generation activities is our Customer Relationship Management and Billing system (CRM). While we have been able to alleviate much of the earlier technical issues relating to our CRM, we need to ensure that it is capable of meeting current requirements, as well as cater for future business expansion. Several measures are accordingly in place to ensure that system maintenance and upgrades do not cause disruptions to our customer servicing capabilities.

Our overseas businesses are often structured through joint-ventures with local partners who can provide vital market knowledge, contacts and networks, as well as meet regulatory and legal requirements. But these arrangements, by their very nature, also limit our control of operations and performance, and in turn, reduce our ability to manage risks and costs.

We thus insist on a thorough due diligence process prior to investing, as well as strong board representation, industry-acceptable legal documentation and other protective measures following a decision to invest, to secure our substantial investments.

To give greater visibility and a more rigorous assessment of these and other business risks faced by the Group, we have instituted a formal process to identify, assess, monitor and manage risks. A newly-established and independent Enterprise Risk Management (ERM) team, reporting to senior management, is now in place to roll out its activities across our business units.

Over the past year, we have increased our focus on succession planning, recruiting top talent and enhancing our professional development programs to ensure that ASTRO has a sufficiently deep management bench to meet the increasing demands of our businesses and rise to the tremendous challenges ahead.

The appointment of Robert Odendaal as Chief Executive Officer in February 2007 reflects that commitment. Robert brings with him extensive media industry experience and expertise in pay-TV in major markets, as well as new media distribution and products. He will extract synergies from our Group's businesses and work closely with the respective business heads to build our operations domestically and across the region, while keeping our products, our infrastructure and our technology relevant and current. I am confident that we have a management team that is focused on the bottomline.

In my new role as Executive Deputy Chairman, I will continue to provide thought leadership, promote governance and advance relationships with regulators, key stakeholders and strategic partners, as well as provide guidance on the Group's investments in the region, particularly the Indian sub-continent, Indonesia and East Asia. I now wish to take this opportunity to thank my fellow board members, friends and colleagues in the media industry, and the various government ministries, for their unstinting support over the last decade. With continuing passion and dedication from management and staff, I am confident that ASTRO will rise to these challenges, and chart a rewarding future.



Ralph Marshall
Executive Deputy Chairman

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