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India media
Digital TV: Goose with the golden egg
Distribution comes of age with advent of DTH
For the past decade, the India media sector has seen a sharp rise in investors’
interest – both strategically and financially – to play the already established and
lucrative consumption story. The key trigger eluding investors has been
digitisation of the TV distribution platform. With a five-fold increase in the number
of digital TV households (HHs) in last three years and a developed ecosystem in
place, we expect the long wait to be over soon.
Multiple triggers converging to shape the market
We believe the underlying demographics of the Indian market – a large number
of households with low TV penetration, rising disposable incomes and a shift in
consumption habits – are conducive to the media industry thriving. Even so, the
Indian distribution market has suffered anaemic growth as government reforms
and investments in the sector have been missing in the past. A more than
US$5bn investment by Indian DTH operators over the last three years has driven
scorching subs growth. In addition, fixed price (i.e., de-linking cost base from
subs growth) content deals imply that positive cash flows are no longer a mirage.
US$2bn opportunity in sight on DTH, more $$ to flow
A shift in consumption patterns and the thrust from the government to switch to a
digital platform could finally unlock a multi-billion-dollar distribution platform
market in the country, we believe. Our conservative analysis of the opportunity
for DTH players is US$2bn by FY14. This estimate is based on a mere 1%
ARPU growth in FY13E and 3% ARPU growth in FY14E. We recognise that this
trend could have a positive ripple effect on TV broadcasters, but prefer playing
the first derivative as valuations appear inexpensive at this time.
DTH: Fraternal twin of Indian telecom
Indian DTH operators have seen strong growth in the subscriber base. The
subscriber ramp-up phase has been similar to that of the Indian telecom industry
over 2004-08, but the similarity ends there. While the Indian telecom market
witnessed an intense tariff war that has just started easing, the Indian DTH
sector is well past that stage, in our view.
Lessons from across the globe: Dish TV has executed well
The size and structure of the Indian TV industry make it difficult to draw a direct
parallel with any of the developed or developing markets. Our report provides a
thorough comparison of the Indian distribution sector on two points: where does
India stand on different penetration (TV, pay TV and digital TV) metrics and how
does the operational performance of Dish TV screen vs. other established DTH
players (see Figs 4 and 21).
Top pick – Dish TV; valuation premium to cable justified
We think favourable industry dynamics for DTH over cable justifies the valuation
differential between the two. We think regulatory push remains a key but difficult
to time trigger for the cable stock performance. Our top pick, Dish TV, has seen
quantum upgrades in street earnings over the last three months and stock
correction on potential ARPU disappointment should provide a good entry point.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India media
Digital TV: Goose with the golden egg
Distribution comes of age with advent of DTH
For the past decade, the India media sector has seen a sharp rise in investors’
interest – both strategically and financially – to play the already established and
lucrative consumption story. The key trigger eluding investors has been
digitisation of the TV distribution platform. With a five-fold increase in the number
of digital TV households (HHs) in last three years and a developed ecosystem in
place, we expect the long wait to be over soon.
Multiple triggers converging to shape the market
We believe the underlying demographics of the Indian market – a large number
of households with low TV penetration, rising disposable incomes and a shift in
consumption habits – are conducive to the media industry thriving. Even so, the
Indian distribution market has suffered anaemic growth as government reforms
and investments in the sector have been missing in the past. A more than
US$5bn investment by Indian DTH operators over the last three years has driven
scorching subs growth. In addition, fixed price (i.e., de-linking cost base from
subs growth) content deals imply that positive cash flows are no longer a mirage.
US$2bn opportunity in sight on DTH, more $$ to flow
A shift in consumption patterns and the thrust from the government to switch to a
digital platform could finally unlock a multi-billion-dollar distribution platform
market in the country, we believe. Our conservative analysis of the opportunity
for DTH players is US$2bn by FY14. This estimate is based on a mere 1%
ARPU growth in FY13E and 3% ARPU growth in FY14E. We recognise that this
trend could have a positive ripple effect on TV broadcasters, but prefer playing
the first derivative as valuations appear inexpensive at this time.
DTH: Fraternal twin of Indian telecom
Indian DTH operators have seen strong growth in the subscriber base. The
subscriber ramp-up phase has been similar to that of the Indian telecom industry
over 2004-08, but the similarity ends there. While the Indian telecom market
witnessed an intense tariff war that has just started easing, the Indian DTH
sector is well past that stage, in our view.
Lessons from across the globe: Dish TV has executed well
The size and structure of the Indian TV industry make it difficult to draw a direct
parallel with any of the developed or developing markets. Our report provides a
thorough comparison of the Indian distribution sector on two points: where does
India stand on different penetration (TV, pay TV and digital TV) metrics and how
does the operational performance of Dish TV screen vs. other established DTH
players (see Figs 4 and 21).
Top pick – Dish TV; valuation premium to cable justified
We think favourable industry dynamics for DTH over cable justifies the valuation
differential between the two. We think regulatory push remains a key but difficult
to time trigger for the cable stock performance. Our top pick, Dish TV, has seen
quantum upgrades in street earnings over the last three months and stock
correction on potential ARPU disappointment should provide a good entry point.
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