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L i g h t f o r C & S i n d u s t r y…
The Cabinet Committee for Economic Affairs (CCEA) has cleared the
ordinance to amend Section 4A of the Cable TV Act, which implies that
the rules to digitise TV broadcast completely will be enabled. Currently,
the sunset date for analogue cable is March 31, 2012 for four metros,
March 31, 2013 for the cities with excess of 1 million population and
March 31, 2014 for all other areas in the country. In the latest guidelines,
these deadlines are expected to be postponed by three to six months
while the FDI cap for the cable and satellite (C&S) distribution industry is
expected to be raised from 49% to 74%.
ƒ Impact on MSOs, LCOs
For complete digitisation to take place, the MSOs will have to make
investments up to | 10,000 crore for the installation of digital
equipment. Accounting for the subsidy to be provided on the set top
box, the investment required would go up to | 25,000 crore. Once
revenue leakages are plugged, MSOs are expected to witness a 4-5x
revenue jump.
The LCOs, on the other hand, will lose a huge amount of revenues,
which they would otherwise earn due to underreporting of
subscribers. Currently, ~80% of subscribers are under reported.
ƒ Impact on DTH industry
Mandatory digitisation will provide ample opportunity to the DTH
industry to increase its subscriber base. Currently, 70% of the Indian
C&S household, which accounts for ~68 million subscribers,
subscribe to analogue TV. These households will have to choose
before the sunset date to go for either DTH or digital cable
connection. The DTH industry is relatively well funded and has the
distribution infrastructure in place. Hence, it is better placed to
capitalise on this opportunity. We expect the DTH industry to speed
up the subscriber addition aided by the festive season as well. Dish
TV, being the market leader, would be the major beneficiary of this
development.
ƒ Impact on broadcasters
The subscription revenues of broadcasters are expected to increase
as underreporting of subscribers will be eliminated completely.
Also, the excess capacity of the digital mode would mean lesser
carriage and placement fees, which currently accounts for 20% of
the broadcasters costs.
Overall, this move is expected to be positive for all players in the C&S
industry including the government as they will collect more taxes due to
prevention of underreporting of subscribers. However, we remain
sceptical about the industry meeting the deadlines of the sunset clause.
For Dish TV, we maintain our DCF target price of | 86, assuming revenue
CAGR of 20.0% over FY11-20 and a terminal growth of 4.5% thereon. We
recommend a HOLD rating on Dish TV.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
L i g h t f o r C & S i n d u s t r y…
The Cabinet Committee for Economic Affairs (CCEA) has cleared the
ordinance to amend Section 4A of the Cable TV Act, which implies that
the rules to digitise TV broadcast completely will be enabled. Currently,
the sunset date for analogue cable is March 31, 2012 for four metros,
March 31, 2013 for the cities with excess of 1 million population and
March 31, 2014 for all other areas in the country. In the latest guidelines,
these deadlines are expected to be postponed by three to six months
while the FDI cap for the cable and satellite (C&S) distribution industry is
expected to be raised from 49% to 74%.
ƒ Impact on MSOs, LCOs
For complete digitisation to take place, the MSOs will have to make
investments up to | 10,000 crore for the installation of digital
equipment. Accounting for the subsidy to be provided on the set top
box, the investment required would go up to | 25,000 crore. Once
revenue leakages are plugged, MSOs are expected to witness a 4-5x
revenue jump.
The LCOs, on the other hand, will lose a huge amount of revenues,
which they would otherwise earn due to underreporting of
subscribers. Currently, ~80% of subscribers are under reported.
ƒ Impact on DTH industry
Mandatory digitisation will provide ample opportunity to the DTH
industry to increase its subscriber base. Currently, 70% of the Indian
C&S household, which accounts for ~68 million subscribers,
subscribe to analogue TV. These households will have to choose
before the sunset date to go for either DTH or digital cable
connection. The DTH industry is relatively well funded and has the
distribution infrastructure in place. Hence, it is better placed to
capitalise on this opportunity. We expect the DTH industry to speed
up the subscriber addition aided by the festive season as well. Dish
TV, being the market leader, would be the major beneficiary of this
development.
ƒ Impact on broadcasters
The subscription revenues of broadcasters are expected to increase
as underreporting of subscribers will be eliminated completely.
Also, the excess capacity of the digital mode would mean lesser
carriage and placement fees, which currently accounts for 20% of
the broadcasters costs.
Overall, this move is expected to be positive for all players in the C&S
industry including the government as they will collect more taxes due to
prevention of underreporting of subscribers. However, we remain
sceptical about the industry meeting the deadlines of the sunset clause.
For Dish TV, we maintain our DCF target price of | 86, assuming revenue
CAGR of 20.0% over FY11-20 and a terminal growth of 4.5% thereon. We
recommend a HOLD rating on Dish TV.
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