Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dish TV : Key takeaways from concall
Subscriber addition will continue to be robust: Q4FY11 has Cricket World Cup in
India and post that is IPL followed by a heavy sports calendar.
Revenue break up in Q3FY11: Out of the total INR 3,730 mn: ~ INR 3,100 mn from
subscription (INR 2,700 mn in Q2FY11), INR 520 mn from lease rental (INR 550 mn in
Q2FY11), INR 75 mn in bandwidth and sale of accessories (INR 20 mn in Q2FY11). In
Q1FY11 INR 2,500 mn in subscription, INR 450 mn in lease rental, INR 65 mn in
bandwidth, sale of accessories.
ARPU: INR 142 in Q3FY11 (INR 139 in Q2FY11, INR 139 in Q1FY11, INR 138 in Q4FY10
and FY10). The company expects an exit ARPU of INR 155 in FY11 (earlier guidance was
INR 150-155).
Bandwidth revenues: Bandwidth revenues have increased because of extra
transponder capacity (total transmission bandwidth increased to 648 MHz from 432
earlier.
Ad revenues: Ads are likely to account for INR 60-80 mn in FY11E. With TV rating
agencies increasing digital weightage in their reported markets from ~8% to 15%,
advertisers have started taking DTH more seriously. To capitalise on this, Dish TV has
amplified its focus on advertising revenues as an alternate revenue stream and is poised
to materially scale up going forward from home page and entertainment guide page.
Premiumisation underway: The company expects an exit ARPU of INR ~155 in FY11
and Q3FY11 has seen improvement Q-o-Q. The improvement will happen because of
premiumisation as subscribers uptrade from Silver to Silver Plus and Silver Plus to Gold,
HD services, ala carte (as ala carte starts at INR 150 while base packs start much lower)
and sports events. Dish TV stopped Silver Packs in October.
Content cost: Currently, 39% of revenues are for content cost. It has remained flat Qo-
Q in spite of huge subscriber addition and fixed nature of content cost as Dish TV has
added some new channels like Neo Sports, Tarang, some regional channels, UTV etc.
The company expects content cost as a percentage of sales to decline gradually. Content
cost will not increase due to World Cup and IPL as Dish TV already has a fixed fee
content deal with these channels.
Subscriber acquisition cost (SAC): SAC has gone up to INR 2,142 (INR 2,600 in
FY10; INR 2,083 in Q2FY11). It has risen marginally Q-o-Q because of the new entry
price at INR 990.
Ad spends: Ad spends are likely to be lower than the earlier guidance of INR 1 bn.
However, ad spends will be higher Q-o-Q in Q4FY11 as the company will invest around
the World Cup.
Entertainment tax (E-tax): E-tax is now 5.5-6% of subscription revenues (earlier
4.5%). Now, 21 states charge entertainment tax. Dish TV is waiting for Supreme Court
decision on this. This is unlikely to increase significantly in the next 2-3 years.
Churn per month: 0.9% per month in Q3FY11 (0.7% in Q2FY11). The company expects
a sustainable churn to be 1% per month as current rates are a bit low. Churn is regarded
if a customer does not pay even 120 days past his due date.
Debt: INR 9.5 bn; Cash: INR 4 bn.
Rate of interest: This has not changed as Dish TV has managed to convert some part
of domestic loan to overseas loan. Currently, it pays an average interest of 10.5%.
Currency impact: INR 7.5 mn which is shown as part of other income.
Fund raising plans: Dish TV had taken an enabling resolution to raise USD 100 mn.
This has still not been finalised.
Depreciation expense: No change in depreciation policy. The company continues to
depreciate set top boxes at 20%. Depreciation expenses were INR 670 mn in Q1FY11,
INR 840 mn in Q2FY11, and INR 902 mn in Q3FY11. This has increased because of the
sharp pick up in subscriber addition.
Provision for set top boxes that are not active: Impact of INR 40 mn in Q3FY11
(INR 30 mn is being taken in Q1FY11 and Q2FY11 each to provide for impairment taken
for inactive subscribers for compliance to IFRS). In FY10 this was INR 81 mn. The
company provides for a non-active consumer by making a provision for set top boxes if
they are beyond 500 days and no payment has been received. From April 1, this period
of 500 days is likely to reduce to 180 days.
Break up of INR 990 entry pack: INR 450 for rental, INR 280 for activation charges,
INR 80 for VAT, and INR 170 for dealer commission.
TRAI recommendation on digitisation: No concrete steps have been taken. DTH
industry is not impacted by any head way in this as the industry is anyways adding
strong numbers.
Loans and advances: INR 700 mn repaid and additionally INR 800-1000 mn will be
repaid in Q4FY11.
No significant impact from two liabilities:
• Dish TV entered into an agreement with its wholly owned subsidiary Agrani Satellite
Services (ASSL) for transponder capacity hiring. ASSL had entered into a satellite
capacity agreement with a supplier for obtaining transponder capacity on a satellite
to be launched. Dish TV provided a corporate guarantee to the supplier for utilizing
the proposed transponder capacity and also to ensure due compliance of agreement
between ASSL and the supplier. However, as the supplier failed to meet various
obligations under the agreement, ASSL terminated the agreement. The supplier
disputed the said termination and initiated arbitration proceedings against ASSL in
ICC International Court of Arbitration at Singapore by filing its claim of USD
190,630,000. Both the parties have reached an amicable settlement and
consequently, the suit has been withdrawn.
• The company had acquired transponder capacity for the HITS services under
Transponder Capacity Agreement. Due to change in government policy, the company
terminated the Agreement with supplier under the Force Majeure condition. The
supplier claimed damages of USD 15,806,802.28. However, subsequent to the
balance sheet, the company and supplier have settled the dispute under which both
parties will be released of all liabilities. Formal settlement agreement is yet to be
executed by the parties. Dish TV management said the impact will be nominal,
if any, in Q4FY11.
Company Description
Dish TV is India’s largest direct-to-home (DTH) company and part of the country’s
biggest media conglomerate – the ‘Zee’ Group. Dish TV has on its platform more than
250 channels and services including 21 audio channels with more than 9.4 mn
subscribers. Dish TV uses the NSS-6 satellite platform which is unique in the Indian
subcontinent owing to its automated power control and contoured beam which makes it
suitable for use in ITU K and N rain zones ideally suited for India’s tropical climate. The
Company has a vast distribution network of more than 1400 distributors and 55,000
dealers that span across 6600 towns in the country. Dish TV has 24* 7 call centre with
1600 seats in 11 different languages to take care of subscriber requirements at any point
of time.
Investment Theme
Dish TV’s first mover advantage and strong distribution network help boost the
subscriber additions. Dish TV has also managed to cut costs by shifting from variable to
fixed-cost content contracts with most broadcasters. The Company is nearing an
inflection point which is expected to result in sharp margin gains over FY10-13. The fund
raising by Dish TV (~INR 16 bn through rights issue and GDR issue) has helped
strengthen its balance sheet. The Company is also expected to benefit from the TRAI
recommendations on setting of sunset date for digitization and reduction in content cost
to 35% from 50% earlier.
Key Risks
• Competition from other DTH service providers
• Competition from alternative technologies especially digital cable
• The DTH industry is subject to extensive regulations and hence it faces the risk of an
unfavorable regulatory environment
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Dish TV : Key takeaways from concall
Subscriber addition will continue to be robust: Q4FY11 has Cricket World Cup in
India and post that is IPL followed by a heavy sports calendar.
Revenue break up in Q3FY11: Out of the total INR 3,730 mn: ~ INR 3,100 mn from
subscription (INR 2,700 mn in Q2FY11), INR 520 mn from lease rental (INR 550 mn in
Q2FY11), INR 75 mn in bandwidth and sale of accessories (INR 20 mn in Q2FY11). In
Q1FY11 INR 2,500 mn in subscription, INR 450 mn in lease rental, INR 65 mn in
bandwidth, sale of accessories.
ARPU: INR 142 in Q3FY11 (INR 139 in Q2FY11, INR 139 in Q1FY11, INR 138 in Q4FY10
and FY10). The company expects an exit ARPU of INR 155 in FY11 (earlier guidance was
INR 150-155).
Bandwidth revenues: Bandwidth revenues have increased because of extra
transponder capacity (total transmission bandwidth increased to 648 MHz from 432
earlier.
Ad revenues: Ads are likely to account for INR 60-80 mn in FY11E. With TV rating
agencies increasing digital weightage in their reported markets from ~8% to 15%,
advertisers have started taking DTH more seriously. To capitalise on this, Dish TV has
amplified its focus on advertising revenues as an alternate revenue stream and is poised
to materially scale up going forward from home page and entertainment guide page.
Premiumisation underway: The company expects an exit ARPU of INR ~155 in FY11
and Q3FY11 has seen improvement Q-o-Q. The improvement will happen because of
premiumisation as subscribers uptrade from Silver to Silver Plus and Silver Plus to Gold,
HD services, ala carte (as ala carte starts at INR 150 while base packs start much lower)
and sports events. Dish TV stopped Silver Packs in October.
Content cost: Currently, 39% of revenues are for content cost. It has remained flat Qo-
Q in spite of huge subscriber addition and fixed nature of content cost as Dish TV has
added some new channels like Neo Sports, Tarang, some regional channels, UTV etc.
The company expects content cost as a percentage of sales to decline gradually. Content
cost will not increase due to World Cup and IPL as Dish TV already has a fixed fee
content deal with these channels.
FY10; INR 2,083 in Q2FY11). It has risen marginally Q-o-Q because of the new entry
price at INR 990.
Ad spends: Ad spends are likely to be lower than the earlier guidance of INR 1 bn.
However, ad spends will be higher Q-o-Q in Q4FY11 as the company will invest around
the World Cup.
Entertainment tax (E-tax): E-tax is now 5.5-6% of subscription revenues (earlier
4.5%). Now, 21 states charge entertainment tax. Dish TV is waiting for Supreme Court
decision on this. This is unlikely to increase significantly in the next 2-3 years.
Churn per month: 0.9% per month in Q3FY11 (0.7% in Q2FY11). The company expects
a sustainable churn to be 1% per month as current rates are a bit low. Churn is regarded
if a customer does not pay even 120 days past his due date.
Debt: INR 9.5 bn; Cash: INR 4 bn.
Rate of interest: This has not changed as Dish TV has managed to convert some part
of domestic loan to overseas loan. Currently, it pays an average interest of 10.5%.
Currency impact: INR 7.5 mn which is shown as part of other income.
Fund raising plans: Dish TV had taken an enabling resolution to raise USD 100 mn.
This has still not been finalised.
Depreciation expense: No change in depreciation policy. The company continues to
depreciate set top boxes at 20%. Depreciation expenses were INR 670 mn in Q1FY11,
INR 840 mn in Q2FY11, and INR 902 mn in Q3FY11. This has increased because of the
sharp pick up in subscriber addition.
Provision for set top boxes that are not active: Impact of INR 40 mn in Q3FY11
(INR 30 mn is being taken in Q1FY11 and Q2FY11 each to provide for impairment taken
for inactive subscribers for compliance to IFRS). In FY10 this was INR 81 mn. The
company provides for a non-active consumer by making a provision for set top boxes if
they are beyond 500 days and no payment has been received. From April 1, this period
of 500 days is likely to reduce to 180 days.
Break up of INR 990 entry pack: INR 450 for rental, INR 280 for activation charges,
INR 80 for VAT, and INR 170 for dealer commission.
TRAI recommendation on digitisation: No concrete steps have been taken. DTH
industry is not impacted by any head way in this as the industry is anyways adding
strong numbers.
Loans and advances: INR 700 mn repaid and additionally INR 800-1000 mn will be
repaid in Q4FY11.
No significant impact from two liabilities:
• Dish TV entered into an agreement with its wholly owned subsidiary Agrani Satellite
Services (ASSL) for transponder capacity hiring. ASSL had entered into a satellite
capacity agreement with a supplier for obtaining transponder capacity on a satellite
to be launched. Dish TV provided a corporate guarantee to the supplier for utilizing
the proposed transponder capacity and also to ensure due compliance of agreement
between ASSL and the supplier. However, as the supplier failed to meet various
obligations under the agreement, ASSL terminated the agreement. The supplier
disputed the said termination and initiated arbitration proceedings against ASSL in
ICC International Court of Arbitration at Singapore by filing its claim of USD
190,630,000. Both the parties have reached an amicable settlement and
consequently, the suit has been withdrawn.
• The company had acquired transponder capacity for the HITS services under
Transponder Capacity Agreement. Due to change in government policy, the company
terminated the Agreement with supplier under the Force Majeure condition. The
supplier claimed damages of USD 15,806,802.28. However, subsequent to the
balance sheet, the company and supplier have settled the dispute under which both
parties will be released of all liabilities. Formal settlement agreement is yet to be
executed by the parties. Dish TV management said the impact will be nominal,
if any, in Q4FY11.
Company Description
Dish TV is India’s largest direct-to-home (DTH) company and part of the country’s
biggest media conglomerate – the ‘Zee’ Group. Dish TV has on its platform more than
250 channels and services including 21 audio channels with more than 9.4 mn
subscribers. Dish TV uses the NSS-6 satellite platform which is unique in the Indian
subcontinent owing to its automated power control and contoured beam which makes it
suitable for use in ITU K and N rain zones ideally suited for India’s tropical climate. The
Company has a vast distribution network of more than 1400 distributors and 55,000
dealers that span across 6600 towns in the country. Dish TV has 24* 7 call centre with
1600 seats in 11 different languages to take care of subscriber requirements at any point
of time.
Investment Theme
Dish TV’s first mover advantage and strong distribution network help boost the
subscriber additions. Dish TV has also managed to cut costs by shifting from variable to
fixed-cost content contracts with most broadcasters. The Company is nearing an
inflection point which is expected to result in sharp margin gains over FY10-13. The fund
raising by Dish TV (~INR 16 bn through rights issue and GDR issue) has helped
strengthen its balance sheet. The Company is also expected to benefit from the TRAI
recommendations on setting of sunset date for digitization and reduction in content cost
to 35% from 50% earlier.
Key Risks
• Competition from other DTH service providers
• Competition from alternative technologies especially digital cable
• The DTH industry is subject to extensive regulations and hence it faces the risk of an
unfavorable regulatory environment
No comments:
Post a Comment