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Dish TV (DSTV.BO; Rs80.15; 1M)
Takeaways from Mumbai - Dish TV presented at our India Investor Conference
in Mumbai. Below are key takeaways.
Subscriber growth remains healthy; Dish maintains its lead - DTH continues
to ride the digitalization wave - post ~12m DTH industry sub adds last year, mgmt
expects another 10-12m subs additions this fiscal - Dish guided to another 3-
3.5m subs in FY12. Of the incremental subscribers, Dish maintains its leadership
position with 27-28% share followed by Airtel and Videocon with 25% and 22%
incremental share respectively.
Content cost inflation should only be moderate - As only one large content
agreement (Sony) comes up for renegotiation in FY12 (July), mgmt does not
expect more than 12-15% content cost inflation. Two other contracts come for
renegotiation in FY13 with ZEEL being an annual contract. Mgmt expects steady
state EBITDA margins of ~28-30%, driven by the lucrative fixed rate agreements,
higher ARPUs (average ARPU growth guidance of 10% in FY12 vs. our current
expectation of 5-6%) and scale benefits.
HD - Strategy to increase ARPUs - The HD strategy bodes well for overall
ARPUs, which are 3.5-4x that of regular connections. Its current HD base is
around 120K subscribers. Interestingly, even after the Cricket World Cup, the HD
subscriber growth remains healthy at ~600-700 sub adds per day (1000 sub adds
per day during the World Cup). Mgmt noted that it has spare transponder
capacity to launch a few more HD channels. Subscriber acquisition cost (SAC) is
~Rs600 more for HD subs.
Balance sheet focus - a) The scheme of arrangement between Dish TV and its
subsidiaries has been complete - a move to transfer the non DTH businesses to
Integrated Subscriber Management Services (ISMSL)- Agrani Satellite Services
(ASSL) has been merged with ISMSL. In the FY11 balance sheet, there was an
adjustment of ~Rs1.5bn, against the general reserves due to the restructuring, b)
Debt is expected to remain at ~Rs11bn; given the refinancing/FX debt
conversion, the cost of debt is expected to be 9.5-10% going forward, c) mgmt
maintains that it can add 3-4m subs with the current cash levels, post which it
expects to use internal accruals.
Other takeaways - a) While the merger of the distribution of Star and ZEEL
could improve the broadcaster's negotiating power, we believe that given Dish's
strong 10m+ gross sub base, it will continue to be better placed. The smaller
cable operators and peers are likely to be impacted more. b) Interoperatibility is
unlikely to be a game changer - according to the mgmt.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dish TV (DSTV.BO; Rs80.15; 1M)
Takeaways from Mumbai - Dish TV presented at our India Investor Conference
in Mumbai. Below are key takeaways.
Subscriber growth remains healthy; Dish maintains its lead - DTH continues
to ride the digitalization wave - post ~12m DTH industry sub adds last year, mgmt
expects another 10-12m subs additions this fiscal - Dish guided to another 3-
3.5m subs in FY12. Of the incremental subscribers, Dish maintains its leadership
position with 27-28% share followed by Airtel and Videocon with 25% and 22%
incremental share respectively.
Content cost inflation should only be moderate - As only one large content
agreement (Sony) comes up for renegotiation in FY12 (July), mgmt does not
expect more than 12-15% content cost inflation. Two other contracts come for
renegotiation in FY13 with ZEEL being an annual contract. Mgmt expects steady
state EBITDA margins of ~28-30%, driven by the lucrative fixed rate agreements,
higher ARPUs (average ARPU growth guidance of 10% in FY12 vs. our current
expectation of 5-6%) and scale benefits.
HD - Strategy to increase ARPUs - The HD strategy bodes well for overall
ARPUs, which are 3.5-4x that of regular connections. Its current HD base is
around 120K subscribers. Interestingly, even after the Cricket World Cup, the HD
subscriber growth remains healthy at ~600-700 sub adds per day (1000 sub adds
per day during the World Cup). Mgmt noted that it has spare transponder
capacity to launch a few more HD channels. Subscriber acquisition cost (SAC) is
~Rs600 more for HD subs.
Balance sheet focus - a) The scheme of arrangement between Dish TV and its
subsidiaries has been complete - a move to transfer the non DTH businesses to
Integrated Subscriber Management Services (ISMSL)- Agrani Satellite Services
(ASSL) has been merged with ISMSL. In the FY11 balance sheet, there was an
adjustment of ~Rs1.5bn, against the general reserves due to the restructuring, b)
Debt is expected to remain at ~Rs11bn; given the refinancing/FX debt
conversion, the cost of debt is expected to be 9.5-10% going forward, c) mgmt
maintains that it can add 3-4m subs with the current cash levels, post which it
expects to use internal accruals.
Other takeaways - a) While the merger of the distribution of Star and ZEEL
could improve the broadcaster's negotiating power, we believe that given Dish's
strong 10m+ gross sub base, it will continue to be better placed. The smaller
cable operators and peers are likely to be impacted more. b) Interoperatibility is
unlikely to be a game changer - according to the mgmt.
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