CTC Media expects to report an OIBDA margin at approximately 32%, similar to the 2012 level. The Company will continue to invest in content but anticipates to maintain its programming expenses stable as a percentage of advertising revenues year-on-year for the full year. The Company also expects that the year-on-year growth in programming expenses will be weighted to the first half of 2013.
Transition to Digital Broadcasting
On March 14, 2013, CTC and Domashny channels entered into agreements on identical terms with the Russian Television and Radio Network ("RTRS"). Under the terms of these agreements, RTRS will provide to CTC and Domashny all services required for the channels to broadcast their signals in digital format throughout Russia to approximately 141.6 million viewers. The specific services, coverage and equipment to be provided by RTRS will be agreed by the parties on an annual basis pursuant to a roll-out plan forming a part of the principal agreement between the parties. The agreements terminate on March 31, 2023. In 2013, the amount payable to RTRS under the agreements by each of the CTC and Domashny channels is approximately $3 million. Fees payable to RTRS for 2014 and beyond will be calculated on an annual basis according to rates that RTRS will set by October 1st of the prior year and will be impacted by the multiplex infrastructure roll-out. These rates will not change more than once yearly and any annual increases in such rates will be in line with the increases in rates set by the Russian Federal Tariff Service for similar types of services. Governmental authorities have indicated that each channel participating in the second multiplex will be expected to pay up to $26 million annually for each channel based on planned rollout deadlines, but in the transition period, these annual transmission fees are expected to be lower and are to be paid by way of installment payments as the digital multiplex rollout progresses. The Company expects to continue incurring analog transmission costs during the analog-to-digital transition period. In 2012, CTC Media incurred approximately $26 million of such expenses for all its television channels.
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