As the deadline for digitisation inches closer, in a move that clearly defines Dish TV’s aggressive target to acquire subscribers in Phase 1 cities, it will offer 70 channels (mostly FTA) free for life. We believe that Dish TV is targeting subscribers at the bottom of pyramid for whom the high cost of STB can be negated by zero monthly charges. This will help further reduce DishTV’s churn rate as there will not be any blackout due to non-payment of monthly subscription fees. We do not expect any significant pressure on ARPU since most Indian viewers are habituated to watching pay channels. We continue to remain positive on Dish TV and expect it to be the key beneficiary of digitization and recent INR appreciation. Maintain ‘BUY’.
Smartly devised free package to reduce subscriber churn
In an assertive move, Dish TV has announced that its new subscribers will have access to over 70 channels free of cost for life in four metros. Most of these channels will be FTA while some will be pay channels. However, this offer comes with the caveat that these subscribers will have to subscribe to a regular Dish TV package at least twice during a year thereby keeping a tab on the churn rate.
Offer to pull in reluctant subscribers as digitisation deadline nears
With the digitisation deadline just three weeks away (just 73% digitisation achieved till now as per Ministry of Information & Broadcasting), there will be a huge scramble for set top boxes till October end. This latest move by Dish TV will offer current analog subscribers a cheaper digital alternative to cable set top boxes. For the Basic Service Tier (minimum 100 FTA channels) mandated for MSOs, TRAI has recommended a price of INR100. As the price of the package is an important parameter in a subscriber’s decision to choose between DTH and digital cable, we feel this offer will give an edge to Dish TV in acquiring subscribers at the bottom of the pyramid.
Outlook and valuations: Positive; maintain ‘BUY’
We expect Dish TV to gain from the digitisation process due to its huge brand and innovations like SD-DVR besides the limited ability of smaller MSOs to switch to digital platform. At CMP, the stock is trading at EV/EBITDA of 14.5x and 10.6x FY13E and FY14E, respectively. We maintain ‘BUY’ and assign ‘Sector Performer’ rating.
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