Friday, February 24, 2012

Digital subscribers to increase 3x in 3-4 years

According to Media Partners Asia (MPA) there are 89m analog pay TV homes in India right now. With the sunset date for cable having been set as December 2014, these 89m homes need to be digitized over the next three years. Assuming the actual process takes 3-5 years, annual conversion from analog to digital works out to 18m-29m subscribers.

We believe the DTH industry is well positioned to acquire half of these subscribers which implies an annual subscriber addition of 9m-15m for the industry. Assuming Dish TV maintains 25% market share in these subscribers, the company is well positioned to acquire 2.5m-3.5m subscribers per annum over the next few years. This is without including any further growth on the Pay TV subscriber base which is currently growing at 7m-8m households per annum.

Large broadcasters like Star and Zee have come together and formed joint ventures to improve their monetization from cable operators. Similarly Sun TV and TV18 group have formed a distribution JV. This enables broadcasters to better negotiate with the MSO and improve the realization for content. On the other hand DTH operators have already become sizable players while MSOs are likely to become stronger with digitization. Thus at the industry level we are seeing consolidation on both sides.

Thursday, February 23, 2012

Status of digitization of Cable TV Networks in India

According to the ordinance, the deadline for digitization in the four metros (~50m population) is June 2012, followed by all cities with 1m population by March 2013, all urban areas by September 2014, and pan India by December 2014. Thus, over the next three years each of the ~89m households will have to be digitized.

The sense we are getting from the industry is that there are execution difficulties and the time line could get extended by 1-2 years, but the digitization process will certainly expedite matters. We have observed that MSOs (Hathway, Den etc) have already started advertising about the mandatory digitization ordinance to their subscribers and are educating them that they need to buy set-top boxes. Also, there is a consultation process being carried out by the sector regulator to address the issues related to digitizing cable, including the pricing of tier and distribution of subscription revenue. Thus we are seeing the digitization process being accelerated.

Wednesday, February 22, 2012

4G No Threat to Hathway's Cable TV Business

Hathway Cable and Datacom CEO, K Jayramn said,

No, I think as far as 4G is concerned that is going to be on the broadband side, where you need the wireless CP and the wireless modems. I still think large majority of people will continue to watch television in the current way which is linear television.

And there are many people who have a PC at home who would continue to avail the broadband services. So, I don't think that 4G will at any stage compete with linear television given the universe and the distribution of TV sets and others and things. So 4G is really going to be expensive as far as the consumer is concerned.

Advertising on DTH + TV Outlook for 2012

The Indian Advertising Industry dominated by TV and Print has witnessed good growth and a whole new telecom has been the biggest contributor to the increase in advertisement spend over the past decade, increasing its share of the pie from 0% to 10%. Over the next decade we heard that rather than a sector, it will be sub sectors that could drive growth. Some of the sub sectors increasing the spends are alcoholic
beverages, foreign auto companies, beauty products etc.

Television is the most effective medium for the large established consumer, auto, telecom players. However for segmented launches or new products the corporates prefer print media, eg a telecom company launching in a new circle, or an auto company coming out with a new product. In these cases television would not be the
optimal use of advertisement spend.

Several of our industry contacts mentioned IPL as a key property to watch out for to get indications of the advertisement spends going forward. IPL is an important property in India as cricket provides the advertisers a pan India reach which none of the other genres can provide, eg the Hindi or regional general entertainment channels (GECs)

Here is the brief summary of the Data and Outlook,
Cautious optimism on the advertisement outlook for 2012. Expect advertisement industry revenue growth of 8-9%. This compares to 15% CAGR over 2003-11. Television continues to be the dominant platform with a share of 44.8% followed closely by print at 42.2%.

Tuesday, February 21, 2012

Subscriber Base - Pay TV market in India

There are 3 main types of Pay TV Service Providers in India.

1. Analog cable is still the dominant platform in India with more than 80m subscribers. Analog cable market is fragmented and is covered by ~ 6,000 MSOs who in turn provide feed to 60,000 local cable operators. Analog cable has poor picture quality and limited carriage capacity. Dominates with more than 80m subscribers but losing turf to digital platform.

2. Direct-to-home (DTH) or satellite TV services are provided by six DTH operators. DTH industry has already added 41m subscribers DTH provides more number of channels and better picture quality compared to analog cable along with other interactive services. Dish, Tata Sky, Sun Direct, Big TV, Airtel, Videocon, Reliance BIG TV, DD Direct are the major players

3. Local cable operators (LCOs) are migrating to digital cable, which requires a digital head-end at the operator’s end and a set top box at the customer’s premise to decode the signal. This service is being provided by LCOs in some parts of India to counter loss of subscribers to DTH. However mandatory digitization ordinance will provide boost to digital cable. They have 5-6 mn customers. WWIL, Hathway, In-cable,
DEN, Digicable are the major players.

Digitization - Key driver for industry over the next few years

There are 147m television homes of which 127m are pay TV homes of which 46m homes are digital (41m satellite TV + 5m digital cable). In December 2011 the Indian government approved the mandatory digitization ordinance and has decided on December 2014 as the sunset date for analog cable. Over the next three years all of the ~89m analog homes have to convert to digital platform (satellite TV or digital cable).

While we do not believe the time line is achievable, this provides a strong thrust towards digitization which is positive for most stake holders including broadcasters, distributors (DTH, MSO), government and consumer. Local cable operators’ revenue would be under risk.

Wednesday, February 15, 2012

Hathway Cable - Digital Dreams Coming True

Hathway Cable and Datacom has already seeded ~27% (~40% including CAS areas) boxes in proposed DAS areas of Mumbai and ~18% in Delhi. With a target of 0.4mn boxes in Kolkata through its JV with GTPL, the company plans to seed ~2.2mn set top boxes in Phase 1. Hathway added ~0.17mn digital subscribers in Q3FY12 and now its digital subscriber base stands at ~1.9mn.

Phase 1 target: Hathway targets to add 2.2mn digital subscribers in Phase 1. Its standalone entity will order ~1.8mn boxes while subsidiaries will order 0.4mn boxes

Subscriber universe: Hathway's subscriber universe is ~8.9mn. DEN and WWIL have a subscriber universes of ~11mn and ~8mn respectively.

STBs: Hathway has ordered 1.8mn STBs; letter of credits have been opened for 1.3mn boxes, while 0.5mn boxes are in inventory.

Metros: Hathway has already seeded ~27% (~40% including CAS areas) boxes in proposed DAS areas of Mumbai and ~18% in Delhi. The number of boxes seeded stands at ~0.35mn till now in non‐CAS areas.

HD: 3200‐3500 subscribers till now. Hathway is offering HD mainly as a combo with broadband. The company hopes to provide 15‐16 HD channels. 3000‐5000 HD subscribers per month will be added in the most optimistic scenario.

Channels: 109 analog channels as of now. Post‐digitization, there is potential to telecast 300‐400 channels.