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Australian banks to face probe; Canadian fund manager to buy stake in Edelweiss unit

Power Forecast Briefing: As retirements accelerate, can renewable energy fill the gap?

2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View

2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Market Driven View

AVIA OTT Summit 2019 Offers Insight Into Changing OTT Roadmap


Australian banks to face probe; Canadian fund manager to buy stake in Edelweiss unit

*The CEOs of Australia's four major banks are set to face a parliamentarycommittee probe in the week of Oct. 3 regarding practices, including poorfinancial advice to clients and failure to pass on the central bank's fullinterest rate cuts, Bloomberg News reported.The investigation will commence with Commonwealth Bank of Australia CEO Ian Narev.

*Canada's Caisse de dépôt etplacement du Québec, or CDPQ, has agreed to acquire a 20% stake inMumbai, India-based EdelweissFinancial Services Ltd. unit Edelweiss Asset Reconstruction Co.Ltd. Business Standard reported,citing the Indian firm. The Canadian fund manager is also investing about 50billion rupees in stressed assets and specialized corporate credit in Indiaover four years.

*The Shanghai Stock Exchange is seeking to buy up to a 40% stake in the PakistanStock Exchange, The Nikkei Asian Reviewreported, citingAyyaz Afzal, director at a unit of the Pakistani bourse.

*Henderson Group Plcand Janus Capital GroupInc. agreed to an all-stock merger of equals to form JanusHenderson Global Investors Plc. Following the merger, , Janus'largest shareholder, will hold about 9% of the combined group. Dai-ichi intendsto invest in the company to raise its ownership interest to at least 15%.

*Cardtronics plc'splanned acquisition of DirectCash Payments Inc. stands the Houston-based paymentprocessor its first foothold in the Asia-Pacific market.

*Gautam Saxena and Saikat Mukherjee, Singapore-based bankers at , left their roles,Bloomberg News reported, citing "people with knowledge of thematter." Saxena was Asia-Pacific head of telecom and media investmentbanking, while Mukherjee served as managing director.

*Mitsubishi UFJ Financial GroupInc. appointed Luis Marcelo Moro as an executive director in itsfinancial institutions group team for EMEA, IFR reported.Moro, who will be based in London, was head of financial institutions coverageat Royal Bank of Scotland GroupPlc for Spain and Portugal.

GREATER CHINA

*The China Securities Regulatory Commission issued regulations for theChina-Hong Kong stock market exchange connect scheme, Caixin reported.The rules set the application scope in both the Shanghai-Hong Kong stockconnect and Shenzhen-Hong Kong stock connect programs, which signifies that thelatter will start soon. The regulator expects investors who buy stocks via thetwo programs through Hong Kong brokerages shall abide by relevant regulationsin Hong Kong rather than in China.

*China will allow investors under its Qualified Foreign Institutional Investorand Renminbi Qualified Foreign Institutional Investor programs to set their ownasset allocation limits, Reuters reported,citing Shanghai Securities News. TheChina Securities Regulatory Commission will scrap limits on asset allocationsunder the QFII and RQFII programs.

*Taiwan's Chung-Hua Institution for Economic Research said the island'spurchasing managers index for manufacturing rose to 56.5 in September, whichhas expanded for the seventh straight month, signaling sustained momentum inmanufacturing activity, the Liberty Timesreported.CIER President Wu Chung-shu expected Taiwan's economy to grow by more than 1%for 2016.

*Ding Kung-wha, chairman of Taiwan's Financial Supervisory Commission,resigned from hispost amid criticism of the regulator's handling of anti-money-laundering rulebreaches at Mega FinancialHoldings Co. Ltd., Reuters reported, citing a statement from theFSC. Ding submitted his resignation in the hope that the move would negatedamage to the FSC over the Mega Financial scandal. Mega Financial unitMega International CommercialBank Co. Ltd.'s New York branch was fined US$180 million by U.S.authorities for lapses and noncompliance with U.S. anti-money laundering laws.

JAPAN AND KOREA

*Mitsubishi UFJ Financial Group CEO Nobuyuki Hirano urged caution in the Bank ofJapan's monetary policy, citing adverse impacts on financial institutions andthe real economy, The Mainichi Shimbunreported. 

*Mitsubishi UFJ Financial Group and Mitsubishi UFJ Lease & Finance Co. Ltd. the acquisition of anaggregate 27.21% stake in HitachiCapital Corp. as part of the companies' capital alliance.Mitsubishi UFJ Financial acquired 26,884,484 Hitachi Capital shares, or a23.01% stake, while unit Mitsubishi UFJ Lease & Finance acquired 4,909,340shares, or a 4.20% stake in the company.

*Sumitomo Mitsui Trust BankLtd. signed an investment trust custodial service agreement withDaiwa SB InvestmentsLtd., Tokyo's The Nikkei reported.

*SBI Sumishin Net BankLtd. will introduce a new lending program that extends fast-tracksmall loans based on credit card transaction data, The Nikkei reported.

*Reliance Nippon Life InsuranceCo. Ltd. named Ashish Vohra as CEO of the company.

*The South Korean government is seeking to convert more than 2 trillion won ofdebt that Export-Import Bank ofKorea holds in Daewoo Shipbuilding & Marine Engineering Co.Ltd. into equity ownership, the MaeilBusiness Newspaper reported.

*According to the Financial Supervisory Service, the combined headcount at SouthKorean banks stood at 132,170 at the end of June, the lowest since 2007, the Maeil Business Newspaper reported.The popularity of online banking is cited as a factor driving a reduction inthe number of bank employees.

*The FSS said that South Korean banks' bad debt exposure to South Koreanconglomerates totaled 19 trillion won in the first half, an increase of 1.3trillion won from the end of 2015, the MaeilBusiness Newspaper reported. 

*Dongbu Life Insurance Co.Ltd. decided to pay out 14 billion won in overdue death benefitsrelated to contested suicide cases, MoneyToday reported.

ASEAN

*Bank Indonesia said its tax amnesty program has recovered 97.2 trillion rupiahfrom the repatriation of 3,621 trillion rupiah, making it the most successfultax amnesty program in the world, BisnisIndonesia reported.

* Indonesia'sInfobank reported thatthe Financial Services Authority has urged PT Bank Maybank Syariah Indonesia to find entities tomerge or consolidate after its gross nonperforming loans doubled to 29.31% from15.15% in the prior-year period.

*PT Bank CIMB NiagaTbk intends to issue bonds worth 2.5 trillion rupiah to support itsloan expansion plans, The Jakarta Globereported.

*Deputy Prime Minister for Economic Affairs Somkid Jatusripitak tasked theSecurities and Exchange Commission of Thailand with three missions that must beclearly laid out within three months, Thailand's Krungthep Turakij reported. One suchmission includes studying ways to support startup businesses in theirfund-gathering process.

*Thai Finance Minister Apisak Tantivorawong affirmed that the PromptPay servicewould be ready to operate Oct. 31 while the Bank of Thailand has beensupervising the operation, Manager Dailyreported.

*TMB Analytics expected that the Thai economy in 2016 should grow by 3.3%, upfrom an earlier projection of 2.8% due to improved private consumption andpublic investment, Krungthep Turakij reported.

*KASIKORN Business-Technology Group will introduce two new applications within2016 for payment and mobile banking services for people with physicaldisabilities, Krungthep Turakij reported.

*The Bangko Sentral ng Pilipinas said the number of banks operating in thePhilippines decreased to 618 in the first half from 638 in the prior-year periodamid continued consolidation of banks, ThePhilippine Star reported.

SOUTH ASIA

*The Reserve Bank of India urgedall banks to make sure their new card acceptance infrastructure would be ableto process payment transactions using Aadhaar-based biometric authentication.The new acceptance infrastructure will be deployed Jan. 1, 2017.

*RBL Bank Ltd.acquired a 9.99%stake in Utkarsh Micro Finance Ltd. and agreed to extend its product portfolioto Utkarsh Micro Finance customers.

*State Bank of Indiaopened its 54th offshore branch in Yangon, Myanmar, Indo-Asian News Service reported.SBI resumed banking operations in Myanmar after a 53-year absence.

AUSTRALIA AND NEW ZEALAND

*Australian Treasurer Scott Morrison said new regulations to make anymanipulation of financial benchmarks by banks or major investors a criminaloffense will "better protect Australians from ... possible abuse," The Australian reported.

*Heartland Bank Ltd.appointed VanessaStoddart as an independent director. Stoddart serves on the boards of NewZealand Refining Co. Ltd., Warehouse Group Ltd., Alliance Group Ltd., the TertiaryEducation Commission and the Financial Markets Authority.

IN OTHER PARTS OF THEWORLD

Middle East & Africa: KCB in search for fintech partners; Moza Banco put underadministration

Europe: Maysets Article 50 date; ING downsizes; no Deutsche US deal yet

Latin America: Colombians reject FARC peace deal; MAPFRE Chile gets new CEO

North America: Janus,Henderson to merge; Illinois ready to suspend business with Wells

North America Insurance: Wisconsin health co-op gets capital infusion; health insurers preferHMO over PPO plans

Sally Wang, Jonathan Cheah,Jaekwon Lim and Santibhap Ussavasodhi contributed to this report.

The Daily Dose has aneditorial deadline of 6:30 a.m. Hong Kong time. Some external links may requirea subscription.

 

 


Watch: Power Forecast Briefing: As retirements accelerate, can renewable energy fill the gap?

Mar. 19 2019 — Steve Piper shares the outlook for U.S. power markets, discussing capacity retirements and whether continued development of wind and solar power plants may mitigate the generation shortfall.

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Credit Analysis
2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View

Mar. 15 2019 — On November 20, 2018, a joint event hosted by S&P Global Market Intelligence and S&P Global Ratings took place in London, focusing on credit risk and 2019 perspectives.

Pascal Hartwig, Credit Product Specialist, and I provided a review of the latest trends observed across non-financial corporate firms through the lens of S&P Global Market Intelligence’s statistical models.1 In particular, Pascal focused on the outputs produced by a statistical model that uses market information to estimate credit risk of public companies; if you want to know more, you can visit here.

I focused on an analysis of how different Brexit scenarios may impact the credit risk of European Union (EU) private companies that are included on S&P Capital IQ platform.

Before, this, I looked at the evolution of their credit risk profile from 2013 to 2017, as shown in Figure 1. Scores were generated via Credit Analytics’ PD Model Fundamentals Private, a statistical model that uses company financials and other socio-economic factors to estimate the PD of private companies globally. Credit scores are mapped to PD values, which are based on/derived from S&P Global Ratings Observed Default Rates.

Figure 1: EU private company scores generated by PD Model Fundamentals Private, between 2013 and 2017.

Source: S&P Global Market Intelligence.2 As of October 2018.

For any given year, the distribution of credit scores of EU private companies is concentrated below the ‘a’ level, due to the large number of small revenue and unrated firms on the S&P Capital IQ platform. An overall improvement of the risk profile is visible, with the score distribution moving leftwards between 2013 and 2017. A similar picture is visible when comparing companies by country or industry sector,3 confirming that there were no clear signs of a turning point in the credit cycle of private companies in any EU country or industry sector. However, this view is backward looking and does not take into account the potential effects of an imminent and major political and economic event in the (short) history of the EU: Brexit.

To this purpose, S&P Global Market Intelligence has developed a statistical model: the Credit Analytics Macro-scenario model enables users to study how potential future macroeconomic scenarios may affect the evolution of the credit risk profile of EU private companies. This model was developed by looking at the historical evolution of S&P Global Ratings’ rated companies under different macroeconomic conditions, and can be applied to smaller companies after the PD is mapped to a S&P Global Market Intelligence credit score.

“Soft Brexit” (Figure 2): This scenario is based on the baseline forecast made by economists at S&P Global Ratings and is characterized by a gentle slow-down of economic growth, a progressive monetary policy tightening, and low yet volatile stock-market growth.4

Figure 2: “Soft Brexit” macro scenario.5

Source: S&P Global Ratings Economists. As of October 2018.

Applying the Macro-scenario model, we analyze the evolution of the credit risk profile of EU companies over a three-year period from 2018 to 2020, by industry sector and by country:

  • Sector Analysis (Figure 3):
    • The median credit risk score within specific industry sectors (Aerospace & Defense, Pharmaceuticals, Telecoms, Utilities, and Real Estate) shows a good degree of resilience, rising by less than half a notch by 2020 and remaining comfortably below the ‘b+’ threshold.
    • The median credit score of the Retail and Consumer Products sectors, however, is severely impacted, breaching the high risk threshold (here defined at the ‘b-’ level).
    • The remaining industry sectors show various dynamics, but essentially remain within the intermediate risk band (here defined between the ‘b+’ and the ‘b-’ level).

Figure 3: “Soft Brexit” impact on the median credit risk level of EU private companies, by industry.

Source: S&P Global Market Intelligence. As of October 2018.

  • Country Analysis (Figure 4):
    • Although the median credit risk score may not change significantly in certain countries, the associated default rates need to be adjusted for the impact of the credit cycle.6 The “spider-web plot” shows the median PD values for private companies within EU countries, adjusted for the credit cycle. Here we include only countries with a minimum number of private companies within the Credit Analytics pre-scored database, to ensure a robust statistical analysis.
    • Countries are ordered by increasing level of median PD, moving clock-wise from Netherlands to Greece.
    • Under a soft Brexit scenario, the PD of UK private companies increases between 2018 and 2020, but still remains below the yellow threshold (corresponding to a ‘b+’ level).
    • Interestingly, Italian private companies suffer more than their Spanish peers, albeit starting from a slightly lower PD level in 2017.

Figure 4: “Soft Brexit” impact on the median credit risk level of EU private companies, by country.

Source: S&P Global Market Intelligence. As of October 2018.

“Hard Brexit” (Figure 5): This scenario is extracted from the 2018 Stress-Testing exercise of the European Banking Authority (EBA) and the Bank of England.7 Under this scenario, both the EU and UK may go into a recession similar to the 2008 global crisis. Arguably, this may seem a harsh scenario for the whole of the EU, but a recent report by the Bank of England warned that a disorderly Brexit may trigger a UK crisis worse than 2008.8

Figure 5: “Hard Brexit” macro scenario.9

Sources:”2018 EU-wide stress test – methodological note” (European Banking Authority, November 2017) and “Stress Testing the UK Banking system: 2018 guidance for participating banks and building societies“ (Bank of England, March 2018).

Also in this case, we apply the Macro-scenario model to analyze the evolution of the credit risk profile of EU companies over the same three-year period, by industry sector and by country:

  • Sector Analysis (Figure 6):
    • Despite all industry sectors being severely impacted, the Pharmaceuticals and Utilities sectors remain below the ‘b+’ level (yellow threshold).
    • Conversely, the Airlines and Energy sectors join Retail and Consumer Products in the “danger zone” above the ‘b-’ level (red threshold).
    • The remaining industry sectors will either move into or remain within the intermediate risk band (here defined between the ‘b+’ and the ‘b-’ level).

Figure 6: “Hard Brexit” impact on the median credit risk level of EU private companies, by industry.

Source: S&P Global Market Intelligence. As of October 2018.

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  • Country Analysis (Figure 7):
    • Under a hard Brexit scenario, the PD of UK private companies increases between 2017 and 2020, entering the intermediate risk band and suffering even more than its Irish peers.
    • Notably, by 2020 the French private sector may suffer more than the Italian private sector, reaching the attention threshold (here shown as a red circle, and corresponding to a ‘b-’ level).
    • While it is hard to do an exact like-for-like comparison, it is worth noting that our conclusions are broadly aligned with the findings from the 48 banks participating in the 2018 stress-testing exercise, as recently published by the EBA:10 the major share of 2018-2020 new credit risk losses in the stressed scenario will concentrate among counterparties in the UK, Italy, France, Spain, and Germany (leaving aside the usual suspects, such as Greece, Portugal, etc.).

Figure 7: “Hard Brexit” impact on the median credit risk level of EU private companies, by country.

Source: S&P Global Market Intelligence. As of October 2018.

In conclusion: In Europe, the private companies’ credit risk landscape does not yet signal a distinct turning point, however Brexit may act as a pivot point and a catalyst for a credit cycle inversion, with an intensity that will be dependent on the Brexit type of landing (i.e., soft versus hard).

1 S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence.
2 Lowercase nomenclature is used to differentiate S&P Global Market Intelligence credit scores from the credit ratings issued by S&P Global Ratings.
3 Not shown here.
4 Measured via Gross Domestic Product (GDP) Growth, Long-term / Short-term (L/S) European Central Bank Interest Rate Spread, and FTSE100 or STOXX50 stock market growth, respectively.
5 Macroeconomic forecast for 2018-2020 (end of year) by economists at S&P Global Ratings; the baseline case assumes the UK and the EU will reach a Brexit deal (e.g. a “soft Brexit”).
6 When the credit cycle deteriorates (improves), default rates are expected to increase (decrease).
7 Source: “2018 EU-wide stress test – methodological note” (EBA, November 2017) and “Stress Testing the UK Banking system: 2018 guidance for participating banks and building societies”. (Bank of England, March 2018).
8 Source: “EU withdrawal scenarios and monetary and financial stability – A response to the House of Commons Treasury Committee”. (Bank of England, November 2018).
9 As a hard Brexit scenario, we adopt the stressed scenario included in the 2018 stress testing exercise and defined by the EBA and the Bank of England.
10 See, for example, Figure 18 in “2018 EU-Wide Stress Test Result” (EBA November 2018), found at:https://eba.europa.eu/documents/10180/2419200/2018-EU-wide-stress-test-Results.pdf

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2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Market-Driven View

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Credit Analysis
2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Market Driven View

Mar. 15 2019 — On November 20, 2018, a joint event hosted by S&P Global Market Intelligence and S&P Global Ratings took place in London, focusing on credit risk and 2019 perspectives.

Giorgio Baldassarri, Global Head of the Analytic Development Group, and I provided a review of the latest trends observed across non-financial corporate firms through the lens of S&P Global Market Intelligence’s statistical models.1 In particular, Giorgio focused on the analysis of the evolution of the credit risk profile of European Union companies between 2013 and 2017, and how this may change under various Brexit scenario; if you want to know more, you can visit here.

I started with an overview of key trends of the credit risk of public companies at a global level, before diving deeper into regional and industry sector-specific performance and pointing out some key drivers of country- and industry-level risk. Credit Analytics Probability of Default (PD) Market Signals model was used to derive these statistics. This is a structural model (enhanced Merton approach) that produces PD values for all public corporates and financial institutions globally. Credit scores are mapped to PD values, which are derived from S&P Global Ratings observed default rates (ODRs).

From January 2018 to October 2018, we saw an increase in the underlying PD values generated by PD Market Signals across all regional S&P Broad Market Indices (BMIs), as shown in Figure 1. For Asia Pacific, Europe, and North America, the overall increase was primarily driven by the significant shift in February 2018, which saw an increase in the PD between 100% to 300% on a relative basis. The main mover on an absolute basis was Latin America, which had a PD increase of over 0.35 percentage points.

Figure 1: BMI Benchmark Median credit scores generated by PD Market Signals, between January 1 and October 1, 2018.

Source: S&P Global Market Intelligence. As of October 2018.

Moving to the S&P Europe BMI in Figure 2, we can further isolate three of the main drivers behind the overall increase in PDs (this time measured on a relative basis), namely Netherlands, France, and Austria. Among these, the Netherlands had the most prominent increase between August and October. Again, one can identify the significant increase in the PDs in February, ranging from 150% to 230%, across all three countries. Towards July, we saw the spread between the three outliers shrink significantly. In August and September, however, the S&P Europe BMI began to decrease again, whilst all three of our focus countries were either increasing in risk (Netherlands, from a 150% level in the beginning of August to a 330% level at the end of September) or remaining relatively constant (France and Austria).

Figure 2: European Benchmark Median PD scores generated by PD Market Signals model, between January 1 and October 1, 2018.

Source: S&P Global Market Intelligence. As of October 2018.

In the emerging markets, Turkey, United Arab Emirates (UAE), and Qatar were the most prominent outliers from the S&P Mid-East and Africa BMI. As visible in Figure 3, the S&P Mid-East and Africa BMI saw less volatility throughout 2018 and was just slightly above its start value as of October. Two of the main drivers behind this increase were the PDs of the country benchmarks for Turkey and the UAE. Turkey, especially, stood out: the PD of its public companies performed in line with the S&P Mid-East and Africa BMI until mid-April, when it increased significantly and showed high volatility until October. On the other hand, the benchmark for Qatar decreased by over 60% between May and October.

Figure 3: S&P Mid-East and Africa BMI Median PD scores generated by PD Market Signals, between January 1 and October 1, 2018.

Source: S&P Global Market Intelligence. As of October 2018.

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We then looked at different industries in Europe. As shown in Figure 4, the main shift in S&P BMIs occurred in February, with most industries staying on a similar level for the remaining period. The main outliers were the S&P Industrials, Materials, and, in particular, Consumer Discretionary Europe, Middle East, and Africa (EMEA) BMIs. The S&P Energy BMI saw some of the highest volatility, but was able to decrease significantly throughout September. At the same time, the Materials sector saw a continuous default risk increase from the beginning of June, finishing at an absolute median PD level of slightly over 1% when compared to the start of the year.

Figure 4: S&P EMEA Industry BMI Median PD scores generated by PD Market Signals, between January 1 and October 1, 2018.

Source: S&P Global Market Intelligence. As of October 2018.

In conclusion, looking at the public companies, Latin America, Asia Pacific, and Europe pointed towards an increase of credit risk between January 2018 and October 2018, amid heightened tensions due to the current U.S. policy towards Latin-American countries, the U.S./China trade war, and Brexit uncertainty.

1 S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence.

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2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View

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AVIA OTT Summit 2019 Offers Insight Into Changing OTT Roadmap

Mar. 06 2019 — Over-the-top video in the Asia-Pacific has been rapidly evolving as OTT players continue to learn and understand the landscape. Industry experts who participated in the Asia Video Industry Association OTT Summit 2019, held February 20 in Singapore, emphasized the importance of relevant content and adaptability of OTT players, particularly in finding the right business model.

According to Media Partners Asia's Vice President Aravind Venugopal, most OTT players that entered the region in 2016 — citing Netflix Inc., HOOQ and iflix — primarily offered a subscription service, whereas PCCW Media Ltd's Viu provided ad-supported content. He said that a year after, each one was trying to figure out what revenue model would work best. It was at that time that sachet pricing, transactional video-on-demand and ad-supported content became more prevalent.

As for 2018, it was said that OTT players moved toward paths through which monetization could continue to grow, and advertising video-on-demand had to be maximized. Venugopal cited that in one of Media Partners Asia's studies, online video platforms that were more ad-focused came out on top. China players such as iQIYI Inc., Tencent Holdings Ltd.'s Tencent Video and Youku Tudou Inc. are able to monetize consumers by adding sachet pricing, as well as allowing customers to purchase magazines or books, or any other offering that would make them stay on the service.

As more OTT services enter the region, finding the most ideal business model to retain and grow viewership can be a challenge. Panelists who were part of the "AVOD vs SVOD vs TVOD: Finding the Right Business Model" discussion, however, agreed there really is not any right model — it is yet to be discovered as OTT players learn more about their respective areas of operation.

Services will have to adapt and should be open to evolving content offerings based on consumers, while also taking regulatory policies into consideration.

In the case of HOOQ, CTO Michael Fleshman highlighted that the company is moving toward using a freemium model, through which consumers may eventually no longer need to register on the site. The OTT player is also trying to maintain simpler packages, with free content very much accessible for everyone.

He also said that HOOQ was initially worried about cannibalizing the subscription video-on-demand business, but as it turns out, engagement is still doing well.

HOOQ recently added linear channels to its offering, and Fleshman emphasized that the OTT service is not shifting but expanding its service so customers will not feel the need to go somewhere else to watch linear channels.

When global OTT player Netflix entered Asia in 2016, it had an international playbook in hand, which made collaborating with local operators a crucial step in learning more about the region. Subscription payment was one of its main concerns and having local partners became beneficial in addressing this.

When asked how the company felt about competitors and what its competitive advantage was in the Asia-Pacific region, Tony Zameczkowski, Netflix's vice president of business development in Asia, said the company sees competition as a good thing.

He also said Netflix's competitive advantage is its platform, content, marketing and partnership. In terms of platform, Zameczkowski elaborated that Netflix provides a "hyper-personalized" service capable of providing recommendations and personalizing the customer's content library.

In terms of content, Zameczkowski acknowledged that the OTT player's local content offering was initially weak. Soon after acquiring various licensing content from producers, however, Netflix started producing original content. The company will continue to invest in relevant titles. In relation to marketing the service, Zameczkowski said that Netflix banks on its titles, part of its promotional strategy.

Partnering with telcos was also very instrumental in establishing Netflix's presence in the region. Likewise, partnering with device manufacturers was important — a different approach for the company, as the Netflix app would normally be included on most devices in U.S. and European markets.

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