Effective July 1, 2012, Dish TV has hiked prices of its ‘Rest of India’ subscription packs by INR20 each. As a result, the price of its popular base pack will increase from INR180 to INR200 (an increase of 11%). We are surprised by the quantum of the price hike especially since the company’s ARPU growth guidance for FY13 was only ~2%-3%. We expect the hike to lead to an increase in ARPU by INR5-INR6 in couple of quarters. Sustained rupee appreciation as seen during the past few days and digitisation will be beneficial for Dish TV. Maintain ‘BUY’.
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Price hike – A positive signal by Dish TV
Unlike the previous prominent price increase in November 2011, this hike is across all packs in the ‘Rest of India’ category. The company has, however, maintained prices of all its South India packs.
Most DTH operators are expected to follow suit and raise prices of their subscription packs. We anticipate that aided by higher penetration of HD and reduced competitive intensity, ARPUs will increase post-digitisation. In our view, increase in pack prices by INR20 in the midst of digitisation beams a positive signal for the DTH industry which has long suffered because of low ARPUs due to high competitive intensity.
Outlook and valuations: Positive; maintain ‘BUY’
Dish TV is expected to have added ~0.5mn subscribers in Q1FY13, higher than 0.41mn in Q4FY12. However, owing to its balance sheet issues, we remain positive on Dish TV only from a long term perspective. At CMP of INR69, the stock is trading at EV/EBITDA of 12.6x and 9.1x FY13E and FY14E, respectively. We maintain ‘BUY’ and assign ‘Sector Performer’ rating to the stock.
Regards,
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