4 Key Issues Shaping the Indian DTH Industry

While we believe that the TV industry is still undergoing structural changes and it could be some time before a relatively stable state is achieved, we identify four key issues that will shape the industry in the next 1-2 years.

Digital subs uptake: We expect slower pace in the next 6-8 months, but see a material pickup in activity in 2H2014, closer to Phase 3/4 deadlines

Tariffs: We expect price hikes in 2014 to continue for digital subs, but expect Phase 3 and 4 launches at lower price points

Content: We see further market fragmentation with new/niche channels. Consensus is not factoring in material content cost increases. We think that this should continue in 2014 as subscribers become more addressable and market segmentation improves. While this would lead to further fragmentation of the market, we think larger broadcasters (such as Zee, Sun TV) should benefit from this given their existing infrastructure, know-how and content library, which will lead to a relatively lower cost of rolling out new channels (faster payback periods) vs. a new entrant.

Regulations: We expect the final outcome of the ad-cap regulation in early 2014, while regulations on media aggregators may come in 2H14. Consensus estimates are currently not factoring any material negative impact, in our view. We think that bigger broadcasters, should be able to better offset the decline in inventory by price hikes given their higher viewership share and reach vs. smaller/news broadcasters.
Indeed, few broadcasters (have indicated ad-rate hikes in the medium term to offset decline in inventory

We note that Phase 1 and 2 of digitization are not yet complete, with court-stays in few cities. An analysis of Census of India’s (2011) data indicates that over 90% of India’s population and c.75% of subscribers to be digitized fall under the regions under Phases 3 and 4 of digitization.

Hathway - Robust subscription, carriage fees; surge in content cost

Hathway’s net realisation per subscriber in Mumbai and Delhi remained unchanged QoQ at INR85 (inclusive of service tax). Subscription revenue jumped ~32% QoQ in Q2FY14 largely due to higher income from Kolkata and Phase 2 cities. Though content costs surged a massive ~75% YoY in  Q2FY14, further increase in H2FY14 will be limited in existing cities as most content deals have been inked.

Currently, Hathway’s total digital subscriber base stands at ~7.7mn, while at Q2FY14 end it was ~7.6mn. The consolidated entity seeded ~0.4mn boxes in Q2FY14. With ~0.8mn boxes in inventory, the company is looking to aggressively seed boxes in Phase 3 cities in H2FY14.

Hathway is one of the best placed MSOs to capitalise on the huge digitisation opportunity.  Compared to DEN, Hathway has a sizeable primary subscriber base, well-entrenched broadband operations and has seeded the highest boxes amongst MSOs. However, commencement of gross billing in Mumbai and Delhi is a key monitorable.

DTH players explore boosting carriage fees revenues

DTH operators ( Dish TV, Airtel and Videocon) are evaluating possibilities of forming joint venture to reduce their content costs and demand higher carriage fee from broadcasters. The news-flow is not
surprising as it more or less in-line with thoughts shared by the Dish TV management during the 2Q FY14 earnings call. With the regulator already raising questions about media aggregators and the market power enjoyed by them, it will tough for three big DTH players to come together.

While we don’t see a case for content costs to come down but we do agree that future increase in content costs could be lower if DTH players come together and some savings are very much possible. Second, DTH players can benefit from incremental carriage revenues as it will be easier for new/small broadcasters to negotiate with a DTH JV representing 3 players and addressing 26m subscribers versus negotiating with 200 small MSOs to get the same reach.

Only a full-fledged merger can allow DTH players to have economies of scale and mere formation of JV for negotiating content costs may not be enough. A fully merged entity can save on transponder /distribution costs and content costs. However that is not what is being explored today but with DTH industry facing growth issues, consolidation seems to be the next logical step for the DTH space in our view. Cable TV space (MSOs) is fragmented in B&C towns, markets where DTH is strong. It may be a matter of time and cable operators may attempt to consolidate in these markets over the next 2-3 years and such a move can hurt DTH.

Cable Operators Want Last Mile Owners Tag

We met with the Maharashtra Cable Operator’s Federation to discuss various issues impacting the progress of Digital Addressable System (DAS). Key issues were as follows:  Local cable operators (LCOs) emphasised they have made significant investments in in the last mile and they own the last mile and the subscribers. We understand that delay in resolution of the above mentioned issues could see LCOs evaluating possibilities of becoming MSOs by themselves (but could face funding challenges). On similar lines possible that LCOs evaluate providing broadband by themselves (hurt MSO ARPU).

Local cable operators (LCOs) seem unhappy with the revenue share formulae for the basic tier package and recommended that their share should be between 60-80% , else they could consider providing similar services by putting their own head-end for FTA (Free to Air ) channels.

LCOs fear losing control over their subscribers if Multi System operators (MSOs) bill directly. As such subscriber billing should not be done by MSO, instead MSOs should allow LCOs access to subscriber management system (similar to what is done in case of airline ticketing).

On similar lines LCOs proposed that subscriber package activation and de-activation should be controlled by them and not MSOs. LCOs recommended that regional channels must be mandatorily made part of the basic tier package; this will allow LCOs to retain subscribers. They fear regional channels may be kept out to improve ARPU

DTH Players to Join Hand Negotiate with Broadcasters

The top three DTH players (market share >60%) (Dish TV, Tata Sky, and Airtel Digital TV) are planning to form a JV to jointly negotiate content cost and carriage revenue with the broadcasters. At present, net content cost (content cost less carriage revenue) for DTH is ~Rs50/sub/month as against Rs5-10/sub/month
for digital cable and negligible cost for analog cable. Increase in bargaining power coupled with the already high payment for content compared with digital cable would enable DTH service providers to restrict growth in net content cost.

TV’s 1Q margins were impacted by higher content and advertising costs. Transponder and middleware costs are expected to rise due to rupee depreciation. Nonetheless, we expect margins to improve in the
coming quarters on normalisation of advertising expense, operating leverage, and increase in ARPU

DTH Players Pay Higher than Cable Players
The Indian media industry is marked by inequitable sharing of content costs and carriage revenue between DTH and cable. Prior to digitisation (FY12), the DTH industry’s net content cost (content cost
less carriage revenue) was ~Rs50/sub/month whereas it was negligible for analog cable. Even after digitisation, we estimate Hathway’s net content cost in digitised markets (phase I and II) at ~Rs10/sub/month in FY14ii as against Dish TV’s net content cost of Rs47/sub/month. In the medium to long term, we expect  this gap to narrow as cable’s carriage revenue declines and content cost rises

Riding the digitization wave

A revolution is taking place in the delivery of content in India. While content has been historically delivered over cable in analogue form, a government led mandatory digitization is currently being implemented. By Dec’14 (as per government schedule), mandatory digitization would have been rolled out in the entire length and breadth of India. As a result of mandatory digitization

Cable distribution companies have outplayed their DTH rivals in Phase 1 & 2 digitization. Our discussions with industry participants lead us to believe that cable may have captured c3/4th of digital converts from analogue cable. Hathway, as market leader in cable distribution has seeded ~6.0m boxes so far in Phase 1 & 2 which signifies their ability to execute.

The latent need for data consumption of the Indian consumer is evident in mobile data usage and revenues’ rapid growth. We believe that cable operators such as Hathway have an opportunity to sell fixed broadband delivered through cable to their digital subscribers with minimum additional investment. Given ARPUs for
broadband could be significantly more than cable TV, Hathway could be viewed as a call option on fixed broadband growth in India.

The significant under-reporting of cable TV subscribers will reduce significantly and will be close to zero over the next 3-4years. This is a game changer for multi system operators (MSOs) such as Hathway as they
can account for any digital cable box they have seeded and get paid. Customers will end up paying more for content which bodes well for broadcasters as well as distribution companies.

The government will also collect more tax in form of entertainment tax, service tax.

DTH Sector 25% decline in subscriber additions

DTH India has not benefited from the digital addressable system (DAS) as multi-system-operators (MSOs) have kept the prices for set top boxes (STBs) low and there has been no change in subscription revenues despite the deployment of STBs (still operating on analogue tariffs). DTH operators, meanwhile, have hiked STB prices by c40% over the past 12 -18 months and subscription fees by c20%.

The DTH sector may see a decline in subscriber additions, possibly by c25% this year. Things may improve should cable TV players decide to raise their ARPUs. The gross subscriber base for the sector is estimated at 50m, with an active base of 38-40m. Incremental volumes (c70%) continue to come from Phase 3 and 4 markets.

Despite concerns over subscriber net additions, the DTH sector may raise prices further shortly and prices on STBs may be raised by another 10% at least. The price hikes have improved the quality of acquisitions for the sector overall, and the industry is seeing subscribers subscribing to higher-end plans. The focus is on improving balance sheets as well.There is no major industry-wide trend of subscribers moving from
present packages to lower packages.

There is a regulatory push towards ‘knowyour-customer’, the progress of which is slow and may take 5-6 months for cable TV operators to have complete subscriber information in place for the Phase1 markets alone. Cable TV ARPU in several markets is still at INR125-130. It will be tricky for cable TV players to make money from such low-end subscribers and MSOs may have to subsidise them.

The notion that cable TV players will not charge customers for servicing is misplaced. In the analogue regime, there was no hardware involved; however, the DAS regime involves hardware, and subscribers will need to pay for any repairs, reducing the disparity between the two sectors.

TRAI’s ad curbs to trip smaller, news broadcaste​rs

TRAI’s recent regulation of limiting ads per hour to 12 minutes is a landmark in many ways. It will be implemented in a phased manner and full compliance is mandated from October 1, 2013. Even though digitisation has been a success in terms of seeding of boxes, inflow of subscription revenue is in a nascent stage. Hence, broadcasters, especially smaller ones and news broadcasters who continue to remain dependent on ads as the predominant source of revenue, will be hurt the most by this regulation. An indirect impact could be reduction in carriage fees by these broadcasters to MSOs as their profits come under pressure. Similarly, smaller advertisers may not be able to bear the burden of increased ad rates and may be compelled to shift to weaker channels. Overall, we expect TRAI’s regulation to pose risk to near term ad revenues as all broadcasters adjust their ad inventory and hike prices gradually to cushion the impact. However, because of increase in collective action by major broadcasters (ad rate hike, withdrawal from TAM), strong market share and relatively lower ad duration (versus smaller broadcasters), the impact on stronger networks like ZEE and Sun TV is likely to be limited.

As per TRAI, ads on TV channels should be restricted to 12 minutes per hour (10 minutes of ads and 2 minutes of promotions) as they affect the quality of viewing. Broadcasters have agreed to comply with this regulation from October 1, 2013. The entire regulation is expected to be implemented in a staggered manner. Currently, as per Mr. Shailesh Shah, Secretary General, Indian Broadcasting Federation (IBF), per hour ad time works out to just over 11 minutes per hour if a full-day average is taken.

Several finer aspects of the ad regulations will be clear in due course. There is no clarity on what exactly qualifies as promotions. Classification of teleshopping programmes and movie trailers as ads or content is unclear. However, broadly, it is clear that Hindi news broadcasters will be impacted the most as they will have to curtail their ad duration per hour from (19+3) minutes to (10+2) minutes. Though print and digital may benefit from the spillover effect, regulating ad duration on TV also raises the question whether other media like print and radio will also be subjected to ad caps.

DEN Digital subscribers Reach 5 Mn

DEN Networks Total digital subscribers are 5mn. The company added 2mn subscribers in Phase 1 and 3mn in Phase 2. DEN added 1.07mn subscribers in Q4FY13. Phase 3 seeding in a major way will start from Q3FY14. Management expects good traction in view of Phase 3 and 4. Also, adjoining cities of Phase 3 and 4 are being targeted even now.

TRAI’s regulation to rent out STB will help increase consumer base in Phase 3 and 4. This will also increase affordability at the bottom of the pyramid. However, it still needs to be seen how the process is implemented. Also, cash flow for cable players will become better in this.

DEN is planning to enter the broadband market by investing USD50mn from fund raising proceeds. It will be targeting Tier I and II cities initially, and based on the success in these markets, it is planning further expansion.

DEN is looking to digitise 6mn subscribers. Hence, till end of Phase 3, investment requirement will be INR6bn. Also, in FY14, investment in broadband will be INR1.5bn and other capex requirement will be INR500mn.

Hathway Digital & Broadband Subscriber Reach 7 Mn

Total digital subscribers are currently ~6.2mn for Hathway. The company added ~2.4mn subscribers in phase 1, ~3.3mn in Phase 2 and ~0.5mn in Phase 3 (adjoining parts of Phase 1 and 2, but officially part of phase 3). Of the 6.2mn subscribers, ~0.6mn are primary while the balance are secondary subscribers. Hathway seeded ~3mn boxes in FY13. Hathway’s subscription revenue increased by INR170mn YoY in FY13. The number was similar at the consolidated level as consolidated numbers include only nine month numbers of GTPL. Subscription revenues will start kicking in from next quarter, which would aid profits. Hathway has entered several new cities in some states where it has strong presence. The company has also strengthened its position in cities like Faridabad, Allahabad, Bengaluru, etc. Phase 3 seeding in a major way will start from Q4FY14. The company is looking to increase its presence in West Bengal, Maharashtra and Andhra Pradesh during Phase 3. Over 1mn boxes of inventory. Hathway’s broadband subscriber base remains at ~0.416mn. Its broadband ARPU is INR300. Mumbai, Pune, Bengaluru and Hyderabad are important cities where the company is looking to improve its technology, which will help increase ARPUs.

TRAI's standard tariff order not a game changer

TRAI has issued a tariff order, prescribing standard tariffs for set-top boxes (STB) for digital cable and DTH subscribers. This specifies security deposit of `400-800 (refundable after three years) and monthly rent of `33-56 for cable TV subscribers for three years. For DTH subscribers, deposit and monthly rent is set at `500-1000 and `43-71, respectively. Besides, MSOs and DTH operators can offer additional tariff plans. They currently charge ~`2000 (non-refundable) for STB activation and no monthly rent. Current value of rent under standard tariffs is equivalent to these realizations. However, we find standard tariffs unattractive due to: (1) Lower upfront collections; (2) risk of default on rent, as subscriber churn rates in DTH are ~10% p.a; and (3) no protection from any increase in STB costs and INR depreciation Impact of the tariff order on DTH companies would depend on actual uptake of STB under the standard tariffs. We expect limited uptake due to likelihood of: (1) Lower promotion of standard plans; (2) customer resistance to monthly rents; and (3) unavailability of additional features under standard plans (recording facility, HD). They currently charge `800-1000 to end users (no rent); its realization is `500-800 after LCO commissions. These tariffs leave limited arbitrage vis-à-vis standard tariff plan.

TRAI Draft Cable Tariff Order not Draconian

The regulator has released a draft tariff order instructing standard tariff packages for set top boxes (STB) for DTH and cable subscribers. The authority has asked for comments from all stakeholders by 26th April. According to the order, all cable and DTH operators would need to offer 4 set top box schemes to consumers (details on Pages 3-5). The cable and DTH operators are free to offer other schemes in addition to the ones prescribed by TRAI.

TRAI believes that post digitalization, STBs provided by various cable and DTH providers would be incompatible with each other making migration between networks difficult for subscribers. Thus in the interests of the consumer, provision for commercial interoperability of STB has to be provided and the tariff order proposes to address that concern.

Our channel checks show that Siti cable has been offering a similar package but it is not finding many takers for this scheme.

We believe that on the ground implementation of the rental scheme of STBs is filled with challenges. The primary concern of the cable and DTH providers would be the difficulty associated with collecting
the boxes from subscribers in case of default of payment or movement of the customer itself.

Zee Growth Rates to Moderate

Zee Entertainment's outperformance (vs. TV ad industry) due to gains in viewership share, favorable base and increased programming hours is largely reflected in FY13 and we expect ad growth rates (ex-sports) to moderate to mid-teens level in FY14E. While sectors like FMCG, durables, luxury retail and internet continue to register higher ad spends, there has been some moderation in ad spends by sectors like autos, telecom and DTH in recent months. ZEEL continues to invest in content and number of original programming hours on its flagship channel Zee TV has risen from 24 to 29 hrs over the last one year and is likely to go up to 31 hrs soon.

Digitalistation to lead the way; though Phase 2 benefits are likely to be limited as per mgmt. Monetization from Phase 2 HH is already good for ZEEL. However benefits from Phase 3 could be substantial but
they will likely accrue over FY15-16E.

Original number of programming hours has been increased to 29.5hrs in Q3 vs. 24hrs last year. Mgmt plans to increase number of original programming hours to 32hrs in FY14. Domestic subscription revenues
have seen a healthy uptick driven by benefits of digitalization and better pricing power with Media Pro JV

Bright for Phase II of Digital Cable / TV

Phase I of the DAS process has been a reasonable success so far with the cities of Mumbai and Delhi almost fully digitized. Kolkata and Chennai have witnessed delays, but these are more due to state-specific issues. We understand that momentum has picked up in Kolkata and digitization should be completed in the next few months. Chennai is a regional market and hence does not have a significant bearing on pan-India players such as Hathway, Dish TV and Zee.

High level of awareness amongst Phase I subscribers. We believe this should apply to Phase II subscribers as well, which includes reasonably big cities such as Bangalore, Pune, Hyderabad and Ahmedabad.

The benefits of digitization are well known and hence we believe there should be little push-back from most of the Phase II consumers as well. This should at least help in fast-tracking the process as time spent on customer education may be less than earlier perceptions.

The average time spent per day by households on watching TV is in excess of six hours, with Mumbai
respondents watching close to eight hours. This is much higher than the national average of ~2.5 hours and 5.3 hours in the US. We believe the trends could be similar in Phase II cities as well (though viewing hours may vary across cities), thus showcasing the importance of TV entertainment and potential for ARPUs to improve.

Companies are also witnessing promising trends in the cities of Pune, Aurangabad, Nashik, Vadodra, Ahmedabad, Surat and Rajkot which in our view augurs well for the roll-out of DAS.

Sun TV Arasu TV deal - Status

Sun TV's management provided some background information - as part of her election manifesto, Tamil Nadu’s current chief minister Ms Jayalalitha had promised low cable TV rates of Rs70 per month. Arasu was essentially executing this election promise.

Sun TV has now signed a deal with Arasu at a reduced rate of Rs25m/month (versus Rs100m/month earlier)

Based on the TRAI recommendations that state monopolies cannot distribute digital cable TV content, Arasu is unlikely to get a licence for distributing digital cable. With digitisation likely to be completed over the next three years, Arasu should lose its significance.

Sun TV's management mentioned that it is confident that Sun TV's promoted Mr Kalanidhi Maran will be exonerated following the CBI enquiry on Astro’s deal with Sun Direct.

Impact of Digitization - Sun TV

Phase 1 digitisation is still pending in Chennai. Management is confident of an additional 1.5m homes contributing to subscription revenue once Chennai digitises over the next quarter or two.

Phase 2 digitisation for Sun TV means an additional 4m homes.
— Bangalore – 1.7m
— Hyderabad – 1.3m
— Coimbatore – 0.4m
— Visakhapatnam – 0.4m
— Mysore – 0.2m

Sun TV believes there may be close to 35-40m cable users in total across the four southern states, and that very few are paying for access currently. Some of these analog cable users may switch to DTH as local multi-system operators (MSOs)/local cable operators (LCOs) are unable to invest in capex. Sun TV charges Rs39/subscriber/month for DTH and Rs25/subscriber/month for digital cable.

Even assuming no increase in rates and no increase in cable and satellite (C&S) households, with a 12-month slippage in the digitisation timetable, management believes subscription revenue could at least triple from the
current annual run rate of Rs5.25bn (based on the latest quarterly subscription revenue of Rs1.3bn).

For the benefit of Subscribers, Sun TV has established a dedicated online consumer complaint box.

Sun TV - Advertising Strategy 15% Growth

The Sun TV Management is confident of delivering 12-15% advertising revenue growth YoY over the next three to four years as business sentiment seems to have improved significantly with the initiatives by the current Indian finance minister, P Chidambaram. Management pointed to the 20% YoY growth in Q3 FY13 in advertising as an encouraging sign of things to come.

Sun TV has not increased its advertising rates since April 2011. Depending on business sentiment, there is a likelihood that advertising rates will be revised ahead of the festival season in September 2013. The last advertising rate increase in April 2011 was by 12-15%.

Sun TV’s advertising inventory is almost completely sold in its GEC and movie channels during prime time. However, non-prime time slots and other channels have significant inventory that can be used if advertising volume picks up.

Fast-moving consumer goods (FMCG) companies account for 55% of its advertising revenue. Local advertisers such as jewellers and textile companies account for 33% of its advertising revenue. The remainder is mostly made up of auto and telecom companies.

Sun TV charges around Rs43,000 for a 10-second slot for its primetime GEC channel. While this is 4-5x of what its Southern rivals charge, it is a fraction of the Rs250,000-300,000 that Hindi GEC broadcasters charge for 10 seconds in a prime time slot. Given Sun TV’s dominance in South India, the company therefore offers a compelling proposition to advertisers.

Sun TV - Strategy - Focus on Content

Sun TV management outlined the company’s strategy as follows,

Content as a big differentiator
— Fresh content from 10:30 am to 11 pm daily, with no repetitions
— A movie library with over 10,000 titles built over the last two decades. All movie rights are perpetual and across all electronic mediums.
— Invest in movies. Buy 60-70% of movies in the four Southern languages

Unique model for outsourced content. For every 24 minutes of content produced by independent producers, Sun TV gives 4 minutes of advertising to the content producer. Given Sun TV’s dominant position in South India, this ensures that Sun TV is not taking a risk that the content may fail to click with its audience. Additionally, as prime time GEC advertising rates for Sun TV are 4-5x that of its rivals, the best producers are aligned with Sun TV. Sun TV only works with content providers on an exclusive basis. It is diversified across content providers and no content provider is producing content for more than two 30-minute slots

Sun TV is focused on the four Southern states (Tamil Nadu, Kerala, Andra Pradesh and Karnataka) that constitute around 38% of households with TVs in India. The company is unlikely to move into the Hindi segment. However, moving to contiguous states such as Maharashtra and Orissa are possibilities.

Sun TV has also partnered with India's Leading Online consumer complaint's platform to resolve its subscribers problems.

Government Monitoring Digitisation of Cable TV

What is the Status of Phase 1 of Digitization ? As per Ministry of Information and Broadcasting data,
(MIB), a total of 6.4m boxes had been seeded in the four metro cities by Nov,12. DEN networks installed 1.8m boxes in Delhi, Mumbai and Kolkata. They expect that Kolkata would be digitalized by the end of January

Phase 2 digitization targets 38 cities and has a deadline of 31st March, 2013. The company is targeting  3.5m - 4m analogue to digital subscriber conversion spread across 23 cities of its presence in phase 2 digitalization. Currently, 0.6m boxes have been deployed in these Phase 2 cities. The mgt shared that government is tightly monitoring the progress by having meetings with stakeholders every 10 days to get latest updates. Additionally, the government is also roping in high ranking local authorities like IAS officers across the 38 cities to ensure the learnings of Phase 1 are utilized during Phase 2 implementation to ensure a smooth transition.

Digitisation to drive cable subscription revenues of TV Channels

Complete transparency in the broadcasting distribution space would increase Zee and Other TV Channel's subscription revenue threefold, even without a price increase. At present, broadcasters barely receive their due share from the cable operators.

As per our calculations, Zee’s ARPU from its cable subscriber base is a third of that from its DTH subscriber base. We believe digitisation is the first and an important step in bridging this gap. It would be easier to increase cable tariffs and gain higher revenue share from LCOs in the digitised broadcasting distribution space.

Zee TV - A to Z of Entertainment

Zee Entertainment (Zee), India’s leading television network, is the best play on booming consumption and structural improvement in India’s pay television market. Zee’s diversified bouquet of channels
and improving network market share would translate into above-industry ad-revenue growth. Furthermore, digitisation and its distribution joint venture with Star network would help secure a rightful share of subscription revenue.

Zee is creating newer genres and making renewed push in genres where the opportunity is now easier to exploit. We believe these initiatives would further strengthen its already strong channel bouquet, increasing the network’s market share. A stronger bouquet of channel would enable the company to exploit the subscription revenue stream in digital broadcasting distribution space better. Additionally, in the medium term, as these channels garner viewership share, it would enable Zee to beat industry’s advertising revenue growth.

Celebrate Maha Kumbh with nexGTv

nexGTv, India’s leading mobile TV service brings to its users an opportunity to watch live and repeat telecasts of all the six baths of the Maha Kumbh that started with Makar Sankranti on January 14, 2013 to Mahashivratri on March 10, 2013 in their mobile phones. Through the channels ETV Uttar Pradesh/Uttarakhand the users will be offered to watch all major six baths live from 6 am till 1 pm and a half-an-hour documentary on Kumbh Amrit Manthan from 8 am to 8:30 am each day.

Kumbh Amrit Manthan is a special feature – an eight episode documentary- to nexGTv users that narrates mythological views on Maha Kumbh 2013 and celebrates the religious spirit of the auspicious event. Also, nexGTv will telecast the six major bathing rituals live from the Sangam. In order to enrich the experience of its users, nexGTv will present musical soft stories and views of experts through discussions on spiritual, sociological and metaphysical aspects of the baths as a voice-over. Viewers can watch the live baths on:

Day	Date	Time
Makar Sankranti	14 January, 2013	6:00 – 13:00
Paush Poornima	27 January, 2013	6:00 – 13:00
Mauni Amavasya	10 February, 2013	6:00 – 13:00
Basant Panchami	15 February, 2013	6:00 – 13:00
Maghi Poornima	25 February, 2013	6:00 – 13:00
Mahashivratri	10 March, 2013	6:00 – 13:00

The service can be downloaded by sending a SMS - mytv to 58888, or from any of the app store and from nexGTv website www.nexgtv.com

4K TV Looks Great Are broadband Networks Ready ?

While 4K, or Ultra High Definition, TVs have been around for some time, they were prominently featured at each manufacturer's booth as a technology ready for high-end consumers. At a film technology panel, studio CTO’s spoke of the superiority of the 4K picture versus HD. Film studios have long been capturing films in 4K for the superior resolution, later editing it to the correct format for distribution. While these 84-110” sets and the picture quality are amazing, we are left concerned about network capacity.

Where the content industry and consumers see better picture quality, we see continued network congestion. A 4K TV signal carries 4x the data of an HD signal, and current networks could not carry them in significant numbers. We estimate HD is transmitted a 6-8Mbps; a 4K TV signal at 25-30Mbps represents half the average network capacity of an existing AT&T U-Verse household. For a cable company, a single 6MHz channel can carry 8-10 SH channels or 2-4 HD channels; the same 6MHz allows for just one 4K TV channel.

Siticable Reaping Compulsory Digitisation of TV Signals

Siticable, a part of the Essel group, is one of the Big 5 national multi-system operators (MSO) in India, along with HATH, DEN, Digicable, Incable. According to the management, the company has a total subscriber reach of ~10mn with a particularly strong presence in Eastern and Northern India. About 2.5mn of its subscribers are in phase-1 digital addressable system (DAS) cities, and another 3-3.5mn are in phase-2 cities

The Company has already seeded ~1.7mn set-top boxes (STB), a majority of these in FY13, and expects to roll out another 0.5-0.6mn in the phase-1 areas. It has an inventory of 0.65-0.75mn boxes. In terms of key cities, Siticable aims to seed STBs for 1.35mn subscribers in Kolkata and 0.8mn in Delhi. It also has 14 digital head-ends across the country

Management indicated that 70%+ of the local cable operator (LCO)/distributor agreements have been signed. Under the agreement, LCOs receive a third of subscription revenue plus 25% of carriage fee while distributors receive 5% of subscription, 25% of carriage fee and Rs 2 per active subscriber a month.

Siticable mentioned that all broadcaster agreements are in place and DAS packages have been announced. Billing systems and call centres too are ready. Given the management’s experience in running a B2C model for pay TV services (DITV is a promoter group entity, albeit a DTH platform), teething problems during DAS rollout could be minimal

Cable TV Digitization - steady progress and going firm

LCOs have largely procured and seeded digital boxes at subscriber premises. While transparency levels between MSO and LCO has always been a contentious issue, under reporting continues to be high even down the chain as LCOs typically operate through few individuals who act as collecting agents for localities. Under digital addressable system (DAS) transparency levels have improved at last mile and demand for boxes including two TV homes has been higher than anticipated.

LCOs have already received MSO agreements which provides for revenue sharing mechanism and the quality of service levels to be maintained by LCOs as per TRAI recommendations. Checks indicate that at least 60-70% of agreements are in place now. Agreement provides for 45% share in FTA channels and INR75 for pay channels (including FTA).

As highlighted earlier MSOs have already announced packages for DAS markets. A few LCOs have proactively started communicating to consumers about various packages and are also collecting CRF forms (mandated by TRAI), we believe this activity is seeing considerable delay. Checks with MSOs now indicate bill generation likely in month of January/ February vs November earlier. We think it is much likely that MSO will push mid end packages which could help improve ARPU.

Ability to negotiate content at attractive rates from broadcasters could help expand subscriber universe. LCOs pointed out that both Hathway and Den had attractive packages at the mid level and consumer acceptance likely to be high. For e.g. popular channels such as Star Plus is available at intro packs of Hathway/ Den and not available with Digi and In Cable as per LCOs.