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Videocon DTH: Takeaways from
management meeting
Event
We met with officials from Videocon d2h to get the company’s view on the
Indian DTH industry, the outlook for the business, their competitive positioning
and future strategy.
The company is promoted by Videocon (VCLF IN, CP: Rs177, Not Rated) and
launched operations in July 2009 (commercial operations were initiated in
April 2010). In recent months, Videocon has emerged as the leader in the
category, garnering the highest subscriber additions. The company has a
gross subs base of 4.1m and expects to cross the 6m mark by Mar 2012.
Impact
Rapid gain in new subs market share. Videocon has taken a lead in the
new subs addition share since Apr 2011. As per its recent press release the
company has emerged as the fastest growing DTH player with new subs
market share of ~25% for the first five months of the current fiscal year.
Management attributes this pick up to (1) leveraging the Sales & Distribution
of the parent company, (2) strong presence and brand strength in semi urban
and rural areas and (3) simple and attractive content package options.
Enough pie for everyone – unlikely to upset the rational competition.
Videocon believes that the industry has already seen the worst of price
competition in 2008-09 and we are unlikely to see irrational action from any of
the DTH operators. The company thinks there are enough structural drivers in
place that the industry can add 30-35m DTH subs over the next three years.
To that end, there is little incentive for anyone to upset the cart. Instead,
existing operators are now focussing on driving profitability up.
Consumer durable legacy helping Videocon to keep STB costs low. The
company is the only Indian DTH operator that locally manufactures its set top
boxes. According to the company, this gives them a ~US$5-6 cost advantage
vs. other players – driving lower subscriber acquisition costs (SAC).
Key financials and operational details. The ARPU is broadly in-line with
listed peer Dish TV. Tight focus on operations has kept monthly churn
relatively low at 0.4%-0.5%.
Adding rapid HD connections. 10% of the new additions are coming in HD
connections for the company. The monthly HD content pack is in the price
range of Rs440. We believe as the Indian TV market upgrades to panel and
flat TV screens, the uptake in the HD subscriber base will be a structural
driver for a sustained increase in ARPU for the industry in the longer term.
Outlook
Positive implications for Dish: (1) Rational competition and (2) secular
industry growth
Negative implications for Dish: (1) Sharper than anticipated loss in net
adds share and (2) competitors faring better on metrics like SAC and churn
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Videocon DTH: Takeaways from
management meeting
Event
We met with officials from Videocon d2h to get the company’s view on the
Indian DTH industry, the outlook for the business, their competitive positioning
and future strategy.
The company is promoted by Videocon (VCLF IN, CP: Rs177, Not Rated) and
launched operations in July 2009 (commercial operations were initiated in
April 2010). In recent months, Videocon has emerged as the leader in the
category, garnering the highest subscriber additions. The company has a
gross subs base of 4.1m and expects to cross the 6m mark by Mar 2012.
Impact
Rapid gain in new subs market share. Videocon has taken a lead in the
new subs addition share since Apr 2011. As per its recent press release the
company has emerged as the fastest growing DTH player with new subs
market share of ~25% for the first five months of the current fiscal year.
Management attributes this pick up to (1) leveraging the Sales & Distribution
of the parent company, (2) strong presence and brand strength in semi urban
and rural areas and (3) simple and attractive content package options.
Enough pie for everyone – unlikely to upset the rational competition.
Videocon believes that the industry has already seen the worst of price
competition in 2008-09 and we are unlikely to see irrational action from any of
the DTH operators. The company thinks there are enough structural drivers in
place that the industry can add 30-35m DTH subs over the next three years.
To that end, there is little incentive for anyone to upset the cart. Instead,
existing operators are now focussing on driving profitability up.
Consumer durable legacy helping Videocon to keep STB costs low. The
company is the only Indian DTH operator that locally manufactures its set top
boxes. According to the company, this gives them a ~US$5-6 cost advantage
vs. other players – driving lower subscriber acquisition costs (SAC).
Key financials and operational details. The ARPU is broadly in-line with
listed peer Dish TV. Tight focus on operations has kept monthly churn
relatively low at 0.4%-0.5%.
Adding rapid HD connections. 10% of the new additions are coming in HD
connections for the company. The monthly HD content pack is in the price
range of Rs440. We believe as the Indian TV market upgrades to panel and
flat TV screens, the uptake in the HD subscriber base will be a structural
driver for a sustained increase in ARPU for the industry in the longer term.
Outlook
Positive implications for Dish: (1) Rational competition and (2) secular
industry growth
Negative implications for Dish: (1) Sharper than anticipated loss in net
adds share and (2) competitors faring better on metrics like SAC and churn
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