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Key takeaways
Volume growth momentum remains strong. Dish TV expected growth momentum to
slacken a tad post the festival period but subscriber additions remain robust. Dish TV has
added >300K subscribers in January and is on course for another >1 mn quarter in
4QFY11E, led by the upcoming ICC Cricket World Cup. Dish TV would be advertising
heavily during the event though largely its HD service. Dish TV was confident of the
industry crossing 60 mn gross subscriber mark by end-FY2013E (~32 mn gross subscriber
base currently, ~15% of the same may be inactive). A significant chunk of subscribers
(~75%) are coming from beyond the top-100 cities, with conversion of cable-dark, weak
cable and DD Direct TV subscribers as key drivers.
ARPU growth may be modest though key focus area. Dish TV expects ARPU in
4QFY11 to be ~Rs145-150, marginally below the guidance given at the start of the year.
However, the company noted the land grab stage of the market and stronger-thanexpected
subscriber volumes (~3.5 mn in FY2011E versus ~2.5 mn guidance given at the
start of the year). Dish TV highlighted (1) ongoing pass-through of prices hikes taken in
September 2010, (2) improving mix of packages (proactive marketing) and (3) valueadded
services and add-on packages as key driver of continued traction in ARPUs, even
though it may be range-bound (4-5%) for some time.
Positive operating leverage as cost structure remains in control—taxes are the bêtenoir.
Dish TV noted that 19% yoy growth in 3QFY11 programming and other costs was
on account of retrospective payments due to delayed renegotiation with one broadcaster
and otherwise, content cost inflation will remain within guidance (~10%). Some of the
content deals come up for renegotiation in FY2012E (one broadcaster) and FY2013E (two)
but (1) rising and highest DTH subscriber base, (2) continued fragmentation in the
broadcasting segment and (3) TAM ratings system taking cognizance of DTH platforms in
their panel implies greater negotiating power. Tax incidence at ~30% of revenues is a
bigger issue (Service tax, VAT, Entertainment tax and License fees).
HD-DTH service would be another key focus area. The company re-iterated renewed
focus on HD-DTH services, also as an important piece of arsenal in the strategy to diversify
away from low-value subscribers and break into high-value subscribers (in the top 100
cities). The company plans to utilize a significant proportion of the recently added
transponder capacity to add HD content to the platform. The company’s strategy would
unfold with the upcoming ICC Cricket World (let’s not spoil the surprise), and Dish TV
would aggressively market its revamped HD-DTH service during the event. (1) Long lead
time in securing transponder capacity and (2) need to align new capacity with existing
satellite makes it harder for competition to follow. Dish TV noted existing base of 4 mn
high-end LCD TV household base in India.
Dismal state of C&S regulations in India but impact of Dish TV/DTH minimal
henceforth. Dish TV expressed continued disappointment with the state of affairs as
regards C&S regulation in India. Most notably, regulations related to License fee reduction
(from high level of 10% of revenues), content costs (revised DTH rate cap at 35% of non-
CAS cable channel rates versus 50% previously) and digitization (public and political
pressure may preclude speedy implementation) remain under the cloud. Nonetheless,
Dish TV/DTH being a B2C-oriented business and with strong volume growth will likely
have limited incremental impact of regulation. A majority of the states have already
implemented Entertainment tax as well, resulting in stable payout (~6% of revenues);
GST may subsume E-tax though there is limited clarity on the same.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key takeaways
Volume growth momentum remains strong. Dish TV expected growth momentum to
slacken a tad post the festival period but subscriber additions remain robust. Dish TV has
added >300K subscribers in January and is on course for another >1 mn quarter in
4QFY11E, led by the upcoming ICC Cricket World Cup. Dish TV would be advertising
heavily during the event though largely its HD service. Dish TV was confident of the
industry crossing 60 mn gross subscriber mark by end-FY2013E (~32 mn gross subscriber
base currently, ~15% of the same may be inactive). A significant chunk of subscribers
(~75%) are coming from beyond the top-100 cities, with conversion of cable-dark, weak
cable and DD Direct TV subscribers as key drivers.
ARPU growth may be modest though key focus area. Dish TV expects ARPU in
4QFY11 to be ~Rs145-150, marginally below the guidance given at the start of the year.
However, the company noted the land grab stage of the market and stronger-thanexpected
subscriber volumes (~3.5 mn in FY2011E versus ~2.5 mn guidance given at the
start of the year). Dish TV highlighted (1) ongoing pass-through of prices hikes taken in
September 2010, (2) improving mix of packages (proactive marketing) and (3) valueadded
services and add-on packages as key driver of continued traction in ARPUs, even
though it may be range-bound (4-5%) for some time.
Positive operating leverage as cost structure remains in control—taxes are the bêtenoir.
Dish TV noted that 19% yoy growth in 3QFY11 programming and other costs was
on account of retrospective payments due to delayed renegotiation with one broadcaster
and otherwise, content cost inflation will remain within guidance (~10%). Some of the
content deals come up for renegotiation in FY2012E (one broadcaster) and FY2013E (two)
but (1) rising and highest DTH subscriber base, (2) continued fragmentation in the
broadcasting segment and (3) TAM ratings system taking cognizance of DTH platforms in
their panel implies greater negotiating power. Tax incidence at ~30% of revenues is a
bigger issue (Service tax, VAT, Entertainment tax and License fees).
HD-DTH service would be another key focus area. The company re-iterated renewed
focus on HD-DTH services, also as an important piece of arsenal in the strategy to diversify
away from low-value subscribers and break into high-value subscribers (in the top 100
cities). The company plans to utilize a significant proportion of the recently added
transponder capacity to add HD content to the platform. The company’s strategy would
unfold with the upcoming ICC Cricket World (let’s not spoil the surprise), and Dish TV
would aggressively market its revamped HD-DTH service during the event. (1) Long lead
time in securing transponder capacity and (2) need to align new capacity with existing
satellite makes it harder for competition to follow. Dish TV noted existing base of 4 mn
high-end LCD TV household base in India.
Dismal state of C&S regulations in India but impact of Dish TV/DTH minimal
henceforth. Dish TV expressed continued disappointment with the state of affairs as
regards C&S regulation in India. Most notably, regulations related to License fee reduction
(from high level of 10% of revenues), content costs (revised DTH rate cap at 35% of non-
CAS cable channel rates versus 50% previously) and digitization (public and political
pressure may preclude speedy implementation) remain under the cloud. Nonetheless,
Dish TV/DTH being a B2C-oriented business and with strong volume growth will likely
have limited incremental impact of regulation. A majority of the states have already
implemented Entertainment tax as well, resulting in stable payout (~6% of revenues);
GST may subsume E-tax though there is limited clarity on the same.
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