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India's C&S market on the cusp of high growth phase
The Indian Cable & Satellite(C&S) industry, the third largest in the world,
with 136mn C&S homes is all set for a revolution as the long-expected
'digitisation' becomes a reality. Currently there are 41mn DTH homes and
6mn Digital cable homes (35% penetration in C&S homes). Going forward
digital subscriber base is expected to rise from 47mn to 83mn by 2015,
increasing at 21%CAGR (2012E-2015E). An industry of Rs270bn will no
longer operate under obsolete analog distribution business post
digitisation. The long standing local cable operator (LCO) 'underreporting'
issue will get resolved with the gradual roll out of digitisation
as per the sunset clause. Aggressive marketing and promotional offers
by DTH players adds to the growth factor of the industry.
Imminent Digitisation set to double digital subscriber base
C&S industry is set to expand to 166mn with 64mn DTH and 20mn digital cable
gross subscribers by 2015E. Aggressive subscriber acquisitions by the well
funded six DTH players have kept the digitisation momentum alive. Now with
compulsory digitisation MSOs and LCOs are left with 'no choice' in the face of
increasing threat from DTH. We believe with Government-mandated digitisation,
the well funded national MSOs and DTH players are all set to capture the
opportunity.
Industry on the threshold of profitability
Currently the C&S industry is largely run under the outdated analog mode of
distribution which has resulted in a highly fragmented value chain and allowed
last mile operator to corner ~80% of the subscription revenue. With compulsory
digitisation, economic retention will be the crucial driver in value creation. Curbing
of revenue leakages will be the main growth factor for C&S industry to register
10% CAGR over 2012E-15E. Out of which we expect 47% CAGR in digital cable
revenue over 2012E-15E.Digital cable players will benefit with increased portion
of retained gains of compulsory declaration, which would drive a 3x rise in
revenues. DTH subscription revenue is estimated to show 22% CAGR during
2012E-15E. Digitisation is bound to reduce the incidence of under-reporting - the
bane of the Indian C&S industry. High operating leverage business model will be
the key driver for organised cable players and DTH operators in magnifying their
operating margins. We see major players in DTH segment and organized MSOs
to breakeven by 2013.
Key Risks - Unsuccessful implementation of digitisation (sunset clause).
Our recommendation
Structural change in cable distribution and DTH ramp up makes us positive on
the Indian C&S Industry and we initiate coverage on the sector, with a 'BUY'
recommendation on Den Networks, Dish TV and Hathway Cable.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India's C&S market on the cusp of high growth phase
The Indian Cable & Satellite(C&S) industry, the third largest in the world,
with 136mn C&S homes is all set for a revolution as the long-expected
'digitisation' becomes a reality. Currently there are 41mn DTH homes and
6mn Digital cable homes (35% penetration in C&S homes). Going forward
digital subscriber base is expected to rise from 47mn to 83mn by 2015,
increasing at 21%CAGR (2012E-2015E). An industry of Rs270bn will no
longer operate under obsolete analog distribution business post
digitisation. The long standing local cable operator (LCO) 'underreporting'
issue will get resolved with the gradual roll out of digitisation
as per the sunset clause. Aggressive marketing and promotional offers
by DTH players adds to the growth factor of the industry.
Imminent Digitisation set to double digital subscriber base
C&S industry is set to expand to 166mn with 64mn DTH and 20mn digital cable
gross subscribers by 2015E. Aggressive subscriber acquisitions by the well
funded six DTH players have kept the digitisation momentum alive. Now with
compulsory digitisation MSOs and LCOs are left with 'no choice' in the face of
increasing threat from DTH. We believe with Government-mandated digitisation,
the well funded national MSOs and DTH players are all set to capture the
opportunity.
Industry on the threshold of profitability
Currently the C&S industry is largely run under the outdated analog mode of
distribution which has resulted in a highly fragmented value chain and allowed
last mile operator to corner ~80% of the subscription revenue. With compulsory
digitisation, economic retention will be the crucial driver in value creation. Curbing
of revenue leakages will be the main growth factor for C&S industry to register
10% CAGR over 2012E-15E. Out of which we expect 47% CAGR in digital cable
revenue over 2012E-15E.Digital cable players will benefit with increased portion
of retained gains of compulsory declaration, which would drive a 3x rise in
revenues. DTH subscription revenue is estimated to show 22% CAGR during
2012E-15E. Digitisation is bound to reduce the incidence of under-reporting - the
bane of the Indian C&S industry. High operating leverage business model will be
the key driver for organised cable players and DTH operators in magnifying their
operating margins. We see major players in DTH segment and organized MSOs
to breakeven by 2013.
Key Risks - Unsuccessful implementation of digitisation (sunset clause).
Our recommendation
Structural change in cable distribution and DTH ramp up makes us positive on
the Indian C&S Industry and we initiate coverage on the sector, with a 'BUY'
recommendation on Den Networks, Dish TV and Hathway Cable.
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