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Arpu will only grow
With content offering more than 25% ahead of its direct-to-home (DTH)
competitors, growing efforts on HDTV and rising media consumption with
high affordability, Dish TV is set to enjoy deeper market penetration as
well as increase in Arpu. We raise our Dish TV Arpu assumptions to
9%Cagr over FY11-13CL, even as the prevalent regulatory curbs stay and
this takes our Ebitda Cagr estimate to 67% and our DCF-based target
from RS85 to Rs93. We maintain our BUY call and expect further upside
potential from pending legislation on digitisation and licence-fee cuts.
Largest transponder capacity, lead in HDTV.
Dish TV has the highest capacity in the DTH sector with 17 transponders,
against Tata Sky’s 11 and other key operators having 7-10 each. The
company provides 267 standard-definition (SD) and 35 high-definition (HD)
channels, which make its content offering more than 25% ahead of its
competitors. Besides leading in content and HDTV offering, its value-addedservice (VAS) offers are also competitive. The operator has reduced the
price of its HDTV set-top box (STB) by about 20% to Rs2,990 and a package
of 20 HD channels at Rs450 (3x the current Arpu) or Rs550 for a package of
35 HD channels. This, and an extensive promotional effort, has allowed its
subscriber-pull HD to contribute 7% of net additions, and management
targets the number to reach 15% in 12 to 18 months.
High affordability increasing media consumption.
Meanwhile, for the basic service with an upfront STB cost of less than
Rs1,200 (US$25) and monthly spending of Rs150 (US$3), India has the
lowest DTH Arpu worldwide and there is high affordability of the service.
Indian households spend less than 1% of monthly income on DTH/cable
services (primary means of entertainment) against 7% in Asia on leisure
and entertainment. Also, a breakdown of Indian household consumption
across various categories, such as transport at 18% and communications at
2% (doubled since 1991 despite a 97% reduction in tariffs), suggests family
spending on media is low. Based on our Mr & Mrs Asia report, discretionary
spending by the Indian middle class is set to more than double to US$442bn
by 2015 and is witnessing a 12-15% wage Cagr. As such, media
consumption will only grow, further enabling DTH Arpu expansion.
We forecast a 9% Arpu and 67% Ebitda Cagr.
We raise our Dish TV Arpu assumption from Rs150 in 4QFY11 to Rs166 by
FY13, driven by increased media consumption, package choices, enhanced
content as well as the takeup of HD/VAS even as the prevalent regulatory
curbs on wholesale/interconnect rates stay. This will take our forecast Ebitda
Cagr from 63% to 67% over FY11-13CL and an increase in our DCF-based
target price from Rs85 to Rs93, implying 17% upside. We maintain BUY with
further upside potential from pending legislation on digitisation and licencefee cuts.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Arpu will only grow
With content offering more than 25% ahead of its direct-to-home (DTH)
competitors, growing efforts on HDTV and rising media consumption with
high affordability, Dish TV is set to enjoy deeper market penetration as
well as increase in Arpu. We raise our Dish TV Arpu assumptions to
9%Cagr over FY11-13CL, even as the prevalent regulatory curbs stay and
this takes our Ebitda Cagr estimate to 67% and our DCF-based target
from RS85 to Rs93. We maintain our BUY call and expect further upside
potential from pending legislation on digitisation and licence-fee cuts.
Largest transponder capacity, lead in HDTV.
Dish TV has the highest capacity in the DTH sector with 17 transponders,
against Tata Sky’s 11 and other key operators having 7-10 each. The
company provides 267 standard-definition (SD) and 35 high-definition (HD)
channels, which make its content offering more than 25% ahead of its
competitors. Besides leading in content and HDTV offering, its value-addedservice (VAS) offers are also competitive. The operator has reduced the
price of its HDTV set-top box (STB) by about 20% to Rs2,990 and a package
of 20 HD channels at Rs450 (3x the current Arpu) or Rs550 for a package of
35 HD channels. This, and an extensive promotional effort, has allowed its
subscriber-pull HD to contribute 7% of net additions, and management
targets the number to reach 15% in 12 to 18 months.
High affordability increasing media consumption.
Meanwhile, for the basic service with an upfront STB cost of less than
Rs1,200 (US$25) and monthly spending of Rs150 (US$3), India has the
lowest DTH Arpu worldwide and there is high affordability of the service.
Indian households spend less than 1% of monthly income on DTH/cable
services (primary means of entertainment) against 7% in Asia on leisure
and entertainment. Also, a breakdown of Indian household consumption
across various categories, such as transport at 18% and communications at
2% (doubled since 1991 despite a 97% reduction in tariffs), suggests family
spending on media is low. Based on our Mr & Mrs Asia report, discretionary
spending by the Indian middle class is set to more than double to US$442bn
by 2015 and is witnessing a 12-15% wage Cagr. As such, media
consumption will only grow, further enabling DTH Arpu expansion.
We forecast a 9% Arpu and 67% Ebitda Cagr.
We raise our Dish TV Arpu assumption from Rs150 in 4QFY11 to Rs166 by
FY13, driven by increased media consumption, package choices, enhanced
content as well as the takeup of HD/VAS even as the prevalent regulatory
curbs on wholesale/interconnect rates stay. This will take our forecast Ebitda
Cagr from 63% to 67% over FY11-13CL and an increase in our DCF-based
target price from Rs85 to Rs93, implying 17% upside. We maintain BUY with
further upside potential from pending legislation on digitisation and licencefee cuts.
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