Monday, April 10, 2017

DishTV + Videocon Merger on Track - Synergy benefits

The company has received required approvals from exchanges, and expects CCI approval to come in by May. Once that comes in, Dish TV is confident the transaction should close by September/October.
The combined entity would have 17% cable and satellite, and 45% DTH market share. Dish TV will buy 4.95% stake from the Videocon promoters on the first day the merged entity begins trading, based on
the previous day's last traded price. Dish would also have the option of buying a further 4.95% stake post the completion of one year of trading of the merged entity for a period of three months, at the closing price of trading on the previous day.

Synergies are possible on multiple fronts with (1) content cost being the largest with content cost for Videocon at 38%, which can come down to the levels of Dish ~30% and then aim for further reduction, (2)
potential to increase both advertising and carriage revenues, (3) reduction on set-top box hardware and software on account of larger scale, (4) other fixed costs like call centre, IT & HR, and (5) transponder costs at a later stage as it will need efforts on realigning dish at consumer premises.

With the proposed tariff order, the regulator is looking to limit bouquets and increase customer choice. This would hurt broadcasters as it limits the free-to-air channels they can push to consumers. MSOs face some pressure on account of carriage, while it does not really impact DTH operators, it will push up content costs for cable operators, which is a positive for Dish.

1 comment:

Mike Kruger said...

I agree that this merger is very positive for both Dish TV India and Videocon d2h. I also agree that the draft tariff order will benefit the DTH players at the expense of broadcasters and MSOs.

But I am not so sure the draft tariff order will be positive for the TV industry as a whole, as it limits the power to bundle. Here in the U.S. subscribers have seen their cost per channel go down over time, and yet their total cable bills have risen substantially over the past 3 decades ... all due to bundling.

Not that anyone cares what I think.