ZING Brand Gains Traction in Orissa- Dish TV

Subscriber addition trends are encouraging in Odisha, but for the rest of India the trends are similar to last year, as per our survey. Notably, Odisha is one of the three states where Dish has launched the lower priced Zing brand. Additionally, some of the dealers we surveyed were of the opinion that Dish’s relatively weaker customer service (compared to other direct to home [DTH] players) has proved to be a hindrance in retaining/improving market share, especially in Tier 1 cities

Zing (low-cost regional offering) in Odisha and the north-east is likely to pull down the average ARPU. Dish indicated during its 4QFY14 conference call that the base pack for Zing users is typically 20% lower than its regular product.


Our survey revealed that package prices have risen 6-10% over the past 6-12 months. Dish’s mid-tier package monthly charge of INR 300 is very similar to that of cable operators in Tier 1 cities (c.INR 250-300) leaving little room for material ARPU upside. A higher proportion of subscribers on Zing and lower ARPU from marginal customers in Tier 3/Tier 4 cities could drag down overall ARPU growth for Dish, in our view.

Dish’s average gross ARPU is c.INR 225 vs INR 250-300 charged by cable operators. While Dish’s ARPUs are marginally lower vs. cable operators, we believe that the differential is not big enough to induce churn given the activation costs for a DTH connection. Besides, Dish’s mid-tier package monthly charge of INR 300 is very similar to that of cable operators in Tier 1 cities (c.INR 250-300). Therefore, we believe it would be difficult for Dish to push up its package prices materially from these levels.

The increasing proportion of lower paying marginal subscribers from Tier 3 and Tier 4 cities would drag down the average ARPU, in our opinion. A further addition in Tier 1 and Tier 2 is difficult as digitisation in these towns is mostly complete and incremental additions would be only via churn (from other operators). The perception that Dish’s customer service is poor, as was highlighted by a few distributors in our survey, would be a hindrance in gaining further churn subscribers, in our view

Cable TV has to go the prepaid way for ARPU Improvement

The -Indian Media sector started getting lot of interest from global and regional investors when the Indian regulator decided to pursue digitisation in four Phases across 2-3 years. So far, DAS has been implemented in phased manner across 40 cities/32 m households over the last two years. However, except for implementation of set top boxes, there has been hardly any benefit as MSO and LCOs have been struggling among themselves over revenue share and subscriber ownership issues. That said, as an interim solution, LCOs have agreed to pay a part of the ARPU to MSOs (referred as gross billing), but this approach has failed to expedite progress on subscriber segmentation and billing.

We highlight the two potential risks gross billing suffers from. Firstly, gross billing based revenue accounting is no way suggesting that cash collections will be at the same rate and MSOs suffering with bad debts over a period of time is not ruled out. The second risk that a gross billing-based approach suffers from is keeping the model on a flat fee structure for long and limiting upsides for all the stakeholders. The large part of the growth for Digital Cable is going to be a function of ARPU improvement. As such, ARPU has to be in link with the content being consumed, suggesting that there has to be a significant amount of focus on subscriber
segmentation and there have to be systems in place that can drive this. Today, there is not much pressure on the LCOs to hasten up subscriber segmentation and drive ARPU improvement.

To sum up, we are of the view that if Cable TV goes the prepaid way, all the above issues could be resolved and subscriber segmentation can be achieved in a more a scalable manner as there will be only a small amount of management bandwidth focussing on collections/bad debts