Risk Factors
Annual Report 2009 / 2010
6.3 Risks related to Media Business 6.3.1 The media business may be adversely impacted, if the Concession Agreement is terminated. VGI entered into a License Agreement to Manage Marketing Service with BTSC (the “License Agreement”) by which VGI has the rights to manage the advertising and commercial spaces on the trains and on the stations pursuant to the License Agreement for a 10-year period (starting from 1999) and VGI has exercised its right to request an extension of the term for an additional 5 years until 2014. BTSC’s Board of Directors has also approved the extension of the License Agreement to expire at the same time as the Concession Agreement (December 2029), and the License Agreement is in the process of being amended. Under this Agreement, BTSC has granted VGI an exclusive license to manage marketing services with respect to advertising space, merchandising areas, exterior train areas and other areas related to the BTS SkyTrain System. If the Concession Agreement with BMA is terminated, BTSC will not have the right to manage or earn benefit from managing the advertising and commercial space on the SkyTrain System, and the License Agreement with BTSC will also be terminated, which would have a material adverse effect on VGI’s business, financial condition, results of operations and prospects. Nevertheless, the termination of the Concession Agreement requires the occurrence of an event of default and would only take effect in accordance with the Concession Agreement as described in Clause 6.1.3 above. 6.3.2 Media business revenue is highly dependent on mass transit revenue. Any reduction to BTS
SkyTrain ridership may adversely impact media business revenue. The majority of the VGI business is derived from managing the advertising space on the BTS SkyTrain System, both trains and stations. Should the ridership of the BTS SkyTrain System fall for any reason, the advertising budget that clients allocate towards advertising on mass transit could be reduced or clients may choose to use other media, which in turn would reduce the revenue that VGI would receive and have a negative impact on the prospects of VGI and the Company. Nevertheless, since commencement of BTS SkyTrain System’s operations, ridership has decreased in only one year. In addition, in the past 5 years, VGI Group has expanded its scope of advertising business by obtaining the right which covers management of advertising spaces in the modern trade such as Tesco Lotus and Tesco Express, Big C Supercenter and Carrefour. 6.4 Generic Risk Factors that May Affect the Company 6.4.1 The Company will significantly depend on distributions from certain principal subsidiaries. The Company will be dependent on dividend distributions from certain of its principal subsidiaries. The determination of the amount of distributions, if any, to be paid to our Company by our subsidiaries
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