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Proposed Ban on Cigarette TV Ads Hits Stocks of Indonesian Media Firms

Jakarta. Shares of Indonesian television operators have fallen over the past week due to a proposed ban on cigarette advertising on television that puts at risk a market estimated to be worth nearly $300 million last year.

Local media last week cited Mahfudz Siddiq, a parliament commission head, as saying the commission hoped to finish discussing by August an amended broadcasting law that would enforce the ban. Government officials could not be contacted by Reuters.

Over the past six sessions, shares of Surya Citra Media, Media Nusantara Citra and Visi Media Asia have posted an average drop of 2.9 percent. The broader Jakarta stock exchange rose 1.3 percent over that period.

The cigarette industry spent an estimated Rp 3.6 trillion ($274 million) on television advertising last year, according to research firm Nielsen.

The big Indonesian cigarette makers include Hanjaya Mandala Sampoerna, Gudang Garam, Wismilak Inti Makmur and Djarum Group.

“The ban is expected to be implemented and once it is implemented it will have an adverse impact on ad spending. The government has been very negative on the cigarette sector [because of the health risks],” said Harry Su, head of research at Bahana Securities.

Other consumer companies have been cutting back marketing expenses due to the slowing economy, so it may be difficult for the broadcasters to find a substitute for any lost advertising revenue from the cigarette makers, Su said.

Cigarette advertisements contribute 6 percent to 7 percent to Surya Citra’s total advertisement sales, Corporate Secretary Hardijanto Saroso told Reuters.

Cigarette companies also sponsor several popular but expensive television programmes such as soccer tournaments on Surya Citra’s television channel SCTV, Saroso said.

Visi Media Asia is waiting for clarity on the regulation, but the operator of TVOne and ANTV channels has been stepping up efforts to get advertising dollars from companies that sell sports products or motorbikes, Director David Burke told Reuters.

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