RTL CEO says positively surprised by Q4

LONDON/NEW YORK Thu Dec 3, 2009 3:19pm EST

LONDON/NEW YORK (Reuters) - RTL Group Plc AUDK.LU, Europe's biggest commercial free-to-air broadcaster, is positively surprised by fourth-quarter advertising sales so far and sees a far smaller decline than in the first nine months.

"The fourth quarter, in comparison to the first nine months, was significantly better. And I mean significant. In almost every country where we operate, the market is surprising us positively in the fourth quarter," RTL Chief Executive Gerhard Zeiler said.

"I don't say the crisis is over, I'm just comparing it to the three consecutive quarters of 2009 and it was much, much, much less declining," Zeiler told the Reuters Global Media Summit in New York and by videolink to London on Thursday.

He cautioned, though, that he had almost no visibility about next year, and said that although there was demand in the advertising market, huge pressure on prices and discounts would likely last into next year.

RTL cut 289 million euros ($437 million) in operating costs in the first nine months of the year, offsetting 78 percent of its decline in revenue, which fell by 9 percent on an underlying basis.

Like ITV, Britain's biggest commercial free-to-air broadcaster, it has achieved most of these savings by moving to cheaper program formats, such as docudramas and game shows.

Zeiler said it was hard to predict what further cost cuts would be needed for 2010. "We have to have the flexibility and we have to have the plans for if the markets are going up again 5 percent, or flat, or going down another 5 percent," he said.

"Outside these two corridors, I don't think we have to worry too much."

PATIENCE

Zeiler added that RTL was prepared to wait as long it took for consolidation in Britain's television market, where RTL owns broadcaster Five, and said RTL's parent Bertelsmann AG BERT.UL would support it in making the right acquisitions.

"Do we like our position in terms of scale? No," he said when asked about Britain, which along with Russia is an anomaly in that RTL is not the biggest or second-biggest in the market.

But he added: "We have no position to rush. No one should underestimate our patience. There will be consolidation and we will be there."

RTL wrote down some programing assets this year at Five, the smallest of Britain's terrestrial free-to-air broadcasters, but Zeiler said the UK remained intrinsically interesting, and said the market had improved significantly.

"In the UK, October was better than September, November was better than October and December is even better, significantly better than December last year, so it is clearly an improving sign," he said.

ITV surprised the market in November when it forecast a 4 percent rise in net advertising revenue for December, the first monthly gain since the first half of 2008. Media reports have since suggested this has improved further.

Zeiler said RTL would stay in Russia, where it holds a 30 percent stake in Ren TV.

RTL Group has 46 TV channels and 30 radio stations in 11 European countries. It is also active in rights trading as well as content production worldwide through its FremantleMedia unit, which has produced shows such as Idols and Farmer Wants a Wife.

Zeiler said he saw no promising acquisition targets in the short term. "Central and Eastern Europe will develop through 2010 and some of the markets will come back," he said.

He added that he had no intention of splitting Fremantle from RTL's broadcasting operations.

"I cannot say content is more important than distribution or distribution more important than content. I think to have both is a very good thing. As long as I'm CEO, nothing will change with this," he said.

($1=.6617 Euro)

(Reporting by Kate Holton and Georgina Prodhan in London, Robert MacMillan in New York, with additional reporting by Nicola Leske in Bonn, editing by Gerald E. McCormick)