Wednesday, September 02, 2015

DTH has threats from 4G Operators in India

We estimate that globally 46% of content is viewed on a device. So far there has been an assumption that only 4G new entrants with their wireless and wireline data capabilities were best placed to offer such services and differentiate. However, the move by Tata Sky suggests that DTH players in India are making serious efforts to address potential threats from 4G entrants. That said DTH continues to be a one way network allowing 4G players to bundle and have an edge.

Other factors where 4G players may see scope could be pricing as current prices are not mass market. That said demand too is niche today and with more subscriber traction we do see prices coming down. In our view other DTH players will be quick to replicate, most likely Bharti DTH in its attempt to limit 4G entrants’ ability to differentiate. Moreover this could allow Bharti a window to cross sell/bundle its other services as well (could be either fixed line offering /Airtel 4G data cards/hot spot devices). Separately Dish TV may follow suit and possibly complement its recently launched video on demand services.

Fate of MSOs - In our view inability to close gaps with DTH on high end product offerings may see MSOs suffering from subscriber churn. Furthermore Phase1/metro markets are key source of carriage revenues for MSOs and sharp subscriber churn in these markets may adversely impact carriage fees and profitability.

Sunday, August 16, 2015

Hathway Cable Subscription Revenues Down

Hathway has aggressively started promoting prepaid billing structure for all its primary subscribers. The company expects this rollout to be completed over the next quarter so as to cover 100% of its primary subscriber base. The company plans to roll out prepaid billing for secondary customers post completion of primary subscriber rollout. It will improve collections in the coming quarters. The company has deployed over 10k HD boxes in Q1. Going ahead, the management expects steady uptick in ARPU on the back of increase in consumer ARPU as new TV packages are launched across its network, prepaid billing and higher HD subscribers. The management guides Phase I and Phase II ARPUs to increase to Rs110 and Rs100 by F16-end on the back of packaging. The content cost, net off placement, is likely to grow by ~15% YoY in F16e.

Broadband revenues grew 56.3% YoY to Rs650mn. The broadband subscriber base was 0.46 million at the end of Q1, including 0.17 million DOCSIS 3.0 subscribers. Broadband business continues its momentum of upgrading LAN/DOCSIS 2.0 consumers onto DOCSIS 3.0 platform. Incremental consumer ARPU has reached Rs850 levels. The roll-out of DOCSIS 3.0 has led to an increase in broadband ARPUs to Rs577 vs. Rs530 QoQ. The company has started providing for 8% license fees which accounted to Rs52mn in Q1 as per renewed Unified Service License conditions. 

Cable universe is stable at 11.8 million subscribers, b) the paying digital subscriber base grew to 6.6 million, c) standalone net debt grew to Rs10,414mn vs. Rs9,143mn QoQ, d) quarterly EBITDA inclusive of Hathway’s economic interest in subsidiaries/JVs/associate companies would aggregate to ~Rs410mn and e) broadband capex expected to be Rs1,700mn in F16 (including capex of Rs1,000mn for additional 600k home pass)

Monday, July 13, 2015

OTT services Add-on to existing TV packages

DTH space has been benefiting from price discipline and quasi consolidation. Though there are six players, effectively it is only a four-player market. Also the DTH industry has seen lot of price discipline over the last three years, evident by the improvement of industry ARPUs. Company sees ARPU improving by at least 10pc this fiscal

Over The Top (OTT) will be an add-on: Not seeing much of threat from entry of OTT players/services as providing content over broadband is not cheap and will be 5x- 10x more expensive versus traditional pay TV services. No doubts these services will have demand but will be restricted to markets with reasonable broadband infrastructure. However the demand is likely to be an add-on service

Costs for High Definition (HD) boxes have come down sharply and the DTH industry is focussing on HD segment (while cable is not). Declining costs allow Videocon d2h to deploy HD boxes at the time of acquiring subscribers with scope to offer HD services at a later stage. The HD base for the company is c10% of the total subscriber base and 30% of net addition for the company in FY15

100 Mn Opportunity 75 new homes are yet to be digitised in Phase III and IV of digitisation. In addition 25m new homes will be added in the next four years. Unlike Phase I which was only 4 metro towns and Phase II which was 38 cities, Phase III is about 38m households spread across 700 urban towns. This scattered nature of Phase III favours DTH

Monday, June 08, 2015

Is Videocon d2h Market Leader ?

Videocon d2h believes it is a leader in terms of incremental sub adds in FY15 – net sub base of ~10.2m (+20% YoY) with est. overall share of ~20% (Dish is the market leader with ~23-25%). Momentum in the overall market growth seems strong – like Dish TV, VDTH expects to sustain the current run-rate in
sub adds in 1H (1.3-1.4m gross adds guidance). It expects 2HFY16 to be better driven by phase-3 digitalization. Encouragingly, churn is stable at ~0.8%

The management spoke of three drivers of an increase in ARPUs – a) price hikes (taken price hikes of 6-7% on avg in Feb, and expects to take another round in Sep which should offset the impact due to higher service tax); b) HD adoption (an impressive ~30% of incremental subs for VDTH; now ~10% of sub base vs. 5% FY14-end); and c) value-added services. Overall it expects ~10% growth in ARPUs in FY16. For Dish TV, our assumption of ~5-6% p.a. increase in ARPUs seems comfortable at this point.

Higher content cost visibility ties in with Dish TV mgmt commentary; they also expect margin leverage (next major negotiation in Sept 16; guide to a modest single-digit increase in content costs).

Wednesday, May 27, 2015

DTH Subscribers Gain Momentum

The DTH companies are expecting windfall additions in subscribers from Phase 3 and Phase 4. Even if the
deadline is extended by a few months, the DTH companies remain confident of seeding boxes on voluntary basis. We estimate that the pace of subscriber addition can accelerate from 10m p.a. to 12m if Phase 3 digitisation is successful. Our checks confirm that gross incremental market share of the top 3 players—Dish TV, Videocon d2h and Tata Sky—is in excess of 75%.

DTH players were happy with the Star RIO (Reference Interconnect Offer) deal. They believe that this has forced cable companies to introduce tiering of content and is a precursor to an increase in consumer ARPU.

We do not think the daily recharge option changes the industry dynamics in a meaningful way. Our checks suggest that there has been no market share shift post the launch of the scheme by one of the DTH players and we might not see competitors launching a ‘me-too’ product.

The industry is in wait-and-see mode over the potential entry of Reliance Jio as a cable MSO. Potential
subsidy on set-top box by the company can be disruptive for the industry.